Bord Gáis index falls by 12%

The Bord Gáis Energy Index dropped by 12% in April mostly on the back of a fall on UK wholesale gas prices following a month of record highs in March.

However, the index is still 33% above the level recorded in Apr 2011.

Commenting on the Bord Gáis Energy Index for April, John Heffernan, power trader at Bord Gáis Energy, said: “In April, Brent crude oil prices hit the lowest levels to date in 2013 and at times traded under the key $100 level.

“The last time Brent crude traded below this level was in Jul 2012.

“Eroding oil demand in Europe, the restoration of North Sea output and the easing of political tensions in the Middle East pushed oil prices down.

“It remains to be seen whether global oil prices will stabilise at, or close to, $100,” he said.

It appears that the $100 level is an acceptable price for OPEC members to produce oil in current quantities.

However, the shale oil revolution in north America is starting to change the global energy landscape and challenge the dominance of OPEC countries.

Weaker oil prices provide assistance to economies that are in need of rebalancing, including opening up further potential for monetary stimulus.

Lower commodity prices also tend to boost spending power and domestic demand in those countries that are particularly large importers of commodities.

The continued issues in the eurozone economy, a weak recovery in China and mixed economic releases from the US suggest that global economic growth remains uncertain.

Despite falling oil prices, record equity markets combined with tumbling gold prices indicate that markets are optimistic about a recovery for the global economy.

If these indicators are correct, oil prices could increase in the months ahead.

With a scarcity of investment options, equities and commodities such as oil are receiving support from yield-hungry investors.

The oil component of the index fell by 9% in April, mostly from the restoration of production in North Sea fields and reduced overall demand. Natural gas prices fell by 16% as the temperatures moderated from the coldest March in 50 years.

The coal element of the index was down 4% as prices hit a three-year-low at the start of the month before rebounding modestly.

An oversupply of coal to the European market continues to weigh on prices. The electricity element of the index was down 17%.

With milder weather and increasing gas supplies to the UK, Ireland’s cost of producing electricity benefited from lower wholesale UK gas prices.