Vayu held a customer event at the Merrion Hotel, Dublin, this week on gas procurement strategies and what to consider when hedging energy requirements. The event shared a review of the current energy landscape after a period of significant turbulence, projection on future gas pricing and advice on best practice when seeking to procure energy.
Several Vayu customers attended the event including Dunnes Stores, Smurfit Kappa, Dublin Aerospace and Bulmers and the presentation was led by Keith Donnelly, Senior Energy Expert at Vayu. Mr Donnelly addressed the recent volatile period for the energy sector highlighting significant weather events like the ‘Beast from the East’ and Storm Emma, continued reduction of gas production from the UKCS and the closure of the Rough Storage facility in June last year, as events that have caused the most impact on the sector. He also added that gas prices shattered all previous records, with balancing prices almost hitting 500p while demand was in excess of 400 mcm for the first time since 2012. Due to this and other mitigating factors, the storage levels of gas in North West Europe are 40% lower than expected, therefore requiring record injections to fill the gap.
An outlook up to summer 2020 was also shared with Vayu’s customers, showing the opportunities and challenges that may arise in the gas market.
While there is still value in the wholesale gas market, Vayu has noticed that there is more volatility in the market as we adjust to life without UK’s Rough storage. So, Vayu would recommend a hedging strategy that should involve hedging all or a portion of your winter requirements and taking a flexible approach to summer. At time of writing Winter-18 is 59.2 p/th and Winter-19 is 53 p/th, but prices have been steadily increasing over the past number of weeks with value seemingly being lost.
There is also currently great value in Summer-19 at 45 p/th and Summer-20 contracts at 41.8 p/th. So if your business requires more energy in the summer then it would be prudent to look at securing these prices now. The key to making this decision is to evaluate what this would mean your business. If it represents good value it may be prudent to act and avoid waiting anxiously on future price movements.
Vayu has stressed that companies need to clearly define which strategy best suits their budget and business in the long term and Vayu works with their customers, with a dedicated customer team, to assess the best approach for businesses to take. This customer event is one of many that Vayu provides around the country so that their customers are fully updated on their energy supply options.
Dated Tuesday 1st May 2018