The Bord Gáis Energy Index has fallen 37% in March due to an unprecedented drop of 55% in oil prices as Covid-19 spread to every corner of the globe decimating growth and energy demand.
The gas market, already awash with supply before Covid-19, fell a relatively muted 3%, with electricity increasing 4% on lower wind generation and coal gaining 3% on growing demand from a recovering China.
In March, the Bord Gáis Energy Index closed at 46.
David Grainger, Energy Trader with Bord Gáis Energy, said, “The Bord Gáis Energy Index fell by 37% in March 2020, with oil experiencing an unprecedented drop as the Covid-19 outbreak spread to every corner of the globe, decimating economic growth and energy demand. Brent crude prices closed at an 18-year low of $22.7 a barrel, a drop of 55% over the month. The gas market fell a relatively muted 3%. Electricity increased 4% on lower wind generation and coal gained 3%.”
Oil plummets 55%…
The fall in oil over recent months, due to trade disputes and softening demand, was only a prelude to the absolute destruction seen in March. The Brent crude benchmark contract settled 55% lower at $22.7 a barrel, the lowest in 18 years. The precipitous drop in March was the result of falling oil demand and a breakdown of the OPEC+ supply restraint agreement.
Ever-tighter restrictions in place to combat the spread of Covid-19 have seen an unprecedented drop in oil consumption, with whole sectors of the global economy in shutdown. On top of this unprecedented demand shock, an agreement that had been in place since 2016 between OPEC and Russia to restrain oil production collapsed, leading to greater supply and driving prices lower.
Gas prices fall 3%…
The NBP day-ahead contract, the price of gas for next day delivery, settled at 23.2p/th in March, a decrease of 3% on the month in euro terms, with markets weak for much of the past year due to a mild winter, a weakening economic outlook and a surge of LNG.
Prices were dealt a further blow as gas demand fell further due to extensive restrictions put in place to combat the spread of Covid-19. Recent economic data shows many economies are experiencing historic contractions in economic activity as the fight against Covid-19 intensifies.
Electricity up 4% in March…
The average day-ahead price for electricity was up 4% going from €33.02/MWh in February to €34.29/MWh in March.
A 5% reduction in demand was more than offset by a reduction in wind output to result in higher day-ahead power prices. Wind provided 44% of total power generation in March compared to 56% in the previous month, with lower power generation from wind typically leading to higher electricity prices.
Coal settles 3% higher and a mixed month for the euro…
Surprisingly, while much of the global economy went into shutdown, coal managed to gain 3% in euro terms settling at $49.3 a tonne, with the resumption in economic activity in China probably behind this rally. The euro gained against the pound in March settling 2.6% higher at £0.885, while it was marginally lower versus the dollar at $1.097, with the dollar benefiting from its safe haven status.
For more information, see the full Energy Index at bordgaisenergy.ie/energyindex/