The Bord Gáis Energy Index fell 15% during February as the coronavirus (Covid-19) outbreak spread beyond China, threatening global energy demand and growth. Oil prices fell 12% on concerns that the increasing threat from the virus could dampen global demand.
Gas prices also fell during February, dropping 21% on robust supply and the negative impact of Covid-19 on already weak demand, while electricity fell 22% and coal dropped 4%.
In February, the Bord Gáis Energy Index closed at 73.
David Grainger, Energy Trader with Bord Gáis Energy, said, “The Bord Gáis Energy Index shows that wholesale energy prices fell 15% during February. The outbreak of the coronavirus is continuing to have a negative impact on the global energy market, with oil falling 12% and gas down 21% in February. Lower gas prices and very high renewable generation meant that Electricity fell 22% in the month. The unsettled weather meant that 56% of power generation in Ireland came from wind with three named storms during the month”.
Oil falls to $52.50 a barrel…
Oil prices closed the month at $52.50 a barrel, a drop of 12% in euro terms, and the lowest monthly close in over two years. Prices have been under pressure for much of the past year due to trade disputes and escalating Middle East tensions. However, over the past month, the baton has been passed to a new threat, the coronavirus. The potentially deadly virus has continued to spread, with the number of people infected now reaching almost 89,000 globally with over 3,045 deaths confirmed.
The spread of the virus beyond its source in China has heightened market concerns that restrictions in place to combat Covid-19 will impact global growth and oil demand. Recent economic data and OECD growth forecasts suggest such fears may be well founded, with a warning that it has the potential to halve global economic growth for 2020.
Gas prices fall 21%…
The day-ahead contract, the price of gas for next day delivery, settled another 5p lower at 23p/th, a decrease of over 21% on the month in euro terms, with a bearish sentiment reverberating through the curve markets seeing global demand take a further hit from the coronavirus.
February, normally the highest demand month for gas, saw prices settle at decade lows for this time of year. A strong supply and benign demand, on the back of another mild winter across key markets, coupled with growing LNG capacity have pushed European and Asian prices toward the US (Henry Hub) price floor.
Electricity down 22% in February…
The average day-ahead price for electricity was down 22% going from €42/MWh in January to €33/MWh in February.
Demand increased by 2.1% over the month, but a 35% increase in wind output combined with a 16% reduction in gas prices, led to much lower power prices. Wind provided 56% of total power generation in February as three named storms led to very unsettled weather across Northern Europe.
Coal settles 4% lower and a mixed month for the euro…
Coal prices settled 4% lower in euro terms at $47.8 a tonne in February on growing anxiety surrounding the coronavirus and global economic growth. The euro gained against the pound in February settling 3% higher at £0.862, while it was marginally lower versus the dollar at $1.10.
For more information, see the full Energy Index at bordgaisenergy.ie/energyindex/