Weather and stockpiling keep gas prices low

Warm weather and the stockpiling of gas has knocked nearly a quarter of the wholesale price of gas, according to the latest Wholesale Market Report on Irish energy prices.

The crucial factor in lowering prices was warmer weather conditions since winter last year, and the absence of any major unplanned outages in sources of supply to the network.

As a result, there is 27% more gas in the European system now than at the same time last year.

Despite fears that the Ukrainian crisis might drive gas prices through the roof, with Russia turning off the tap to Europe, so far the supply has been unaffected.

Senior energy analyst at Vayu, Joanne Daly, said a risk premium is being factored into the price but, due to low demand, the price remains low.

“The gas market is fundamentally bearish at present while factoring in a risk premium for uncertainty in Ukraine,” said Ms Daly.

“We’re seeing the prices of gas contracts further out than one month being dragged down by the prospect of reduced demand over the summer and lower requirements to build up inventories.”

Any escalation in Ukraine could have a severe impact on Ireland, as Russia is still Europe’s largest gas supplier with the majority of the gas being piped via Ukraine.

“Any disruption in supply would have knock-on effects on prices in Ireland, given the interconnected nature of Europe’s energy markets,” said Ms Daly.

“However, Britain — which is Ireland’s major source of gas — is better placed to handle supply disruptions compared to countries in Central and Eastern Europe that rely more heavily on Russian supply.”