Index up 8% despite oil fall

Falling oil prices have curtailed increases to the Bord Gáis Energy Index for October which is still up 8% year-on-year despite a 2% fall in October.

As a result, the Bord Gáis Energy Index now stands at 148, an increase of 8% on Oct 2011.

Power trader at Bord Gáis Energy John Heffernan said despite falling Brent crude oil prices over the last two months, the future for oil prices is far from certain. He believes the markets are concerned about the impact looming tax increases and reduced government spending would have on the US and the global economy.

Mr Heffernan said questions as to whether China’s protracted slowdown has indeed run its course will also have an influence on prices, as will ongoing tensions in the Middle East and potentially the outcome of the US election.

Among the key trends identified by Bord Gáis Energy Index for the month of October were: Oil: The oil element of the index was down 4%.

In addition to weaker US equity indices and concerns over the prospects for global economic growth, further announcements from OPEC that oil supplies were comfortable, and soundings from the IEA that only a serious supply disruption would merit any release of strategic oil stocks, put downward pressure on oil prices.

Natural gas: The natural gas element of the index was up 6%. Gas supply anxieties supported prices during the first month of the gas winter 2012/13.

The factors that raised trader anxiety included a number of mechanical failures which disrupted Norwegian supplies through the vital Langeled pipeline and the arrival of only three LNG cargoes to the UK in October, compared to 11 in October 2011.

Coal: The coal element of the index was down 5%. This is the third successive monthly fall in coal prices. In Europe, the coal market remains subdued due to ample supplies from Colombia, which is one of the world’s top five thermal coal exporters.

Electricity: The electricity element of the Index was up 1%. Gas imported from Britain is a key component in the production of energy in Ireland.

The 6% rise in the monthly average UK day-ahead price in October, contributed to higher wholesale electricity prices. As a result of the colder weather, peak demand is starting to increase, putting pressure on wholesale prices.