In euro terms, Irish wholesale gas prices are 14% lower on average this month compared to October 2015. This is due to continued healthy supply, lower oil prices and decreased demand. However, the average wholesale gas price this month is up 39% compared to last month. A significant supply overhang pushed the prompt market to lows not seen since 2009 during the first half of September, so the month on month increase is a normalisation of the market.
Gas prices gained over 8p in sterling terms in the first four days of October trade. The impact in cent/kWh was limited by the weakness of sterling to the euro, enabling Irish and euro businesses to enjoy more competitive prices than UK businesses which saw wholesale gas prices increase 5% year on year and 46% month on month.
The average day-ahead price for gas, the contract for gas delivery tomorrow, is 1.59 c/kWh (cents per kilowatt hour) for October so far. This compares with an average price of 1.85 c/kWh in October 2015. In euro terms, Irish wholesale gas prices are 29% lower compared with the average monthly price recorded for October over the three previous years (2013 – 2015).
Gillian Lawler, Senior Energy Analyst at Vayu Energy said that contracts were driven by movements in both the EUR/GBP exchange rate and Brent crude at the beginning of the month. “A stronger euro relative to the pound and gains made on oil pushed curve contracts up. The pound fell relative to the euro following the announcement that the UK will begin the process to leave the EU by the end of March 2017. The current outlook is for contracts to stay in positive territory with the rally in oil expected to continue and weakness of sterling still holding.