Report reveals wholesale gas prices have dropped more than a third

Report reveals wholesale gas prices have dropped more than a third

Irish wholesale gas prices are 35% lower on average this month compared to August 2015, according to the latest Wholesale Energy Market Report published by Vayu Energy.

The losses are attributed to healthy supply, decreased demand year-on-year and the price drop in oil.

Gas prices are down 10% month-on-month, as we are in the period of lowest demand of the year.

The average day-ahead price for gas, the contract for gas delivery tomorrow, is 1.25c/kWh (cents per kilowatt hour) for August so far.

This compares with an average price of 1.90c/kWh in August 2015.

Gillian Lawler, Senior Energy Analyst at Vayu said that abundant supply continues to be the main driver of gas prices for delivery next month.

However, she said there may be a further downside to winter prices as sterling continues to perform poorly against the euro, which is good news for euro backed traders.

She said: "Updated storage figures show European stocks are extremely healthy. In addition, the recent update from Centrica that its Rough storage facility, which houses 70% of the UK’s storage capacity, will have 20 wells available for withdrawals from November 1st is also good news.

This accounts for two thirds of wells at the facility, a significant improvement to earlier expectations of just four wells being available to year end."

However, she said that LNG (liquified natural gas) deliveries have been disappointing as producers try to bolster global prices.

She said: "Cargoes have been diverted from Europe to keep prices elevated to avoid the LNG market crashing altogether. Continued output problems in some countries have added to the lack of arrivals to the UK.

"Qatar has been sending cargoes below market value to Japan and India, and the US is sending cargoes to non-European markets also. It looks like 16% of global LNG production will have come to Europe by the end of 2016, below some forecasts. However, the deliveries into Europe are still up 20% year on year."

In the meantime, pipeline gas is making up for unpredictable LNG availability.

"The Norwegian Petroleum Directorate has increased expected natural gas demand for September," Ms Lawler said.

"Supply from Norway has been key so far this year as LNG deliveries disappointed, and has out-produced its original forecasts for the year."

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