The Bord Gáis Energy Index increased by 5% in July as energy markets climb back from the lows seen in April, when Covid-19 lockdowns reduced energy demand in key markets.
Growth in July was led by a 16% increase in electricity prices due to outages at some gas power stations and an increase in the average carbon price over the month. Oil had another strong month with prices gaining 6% as Covid-19 restrictions eased and reduced supply helped prices to recover. Among the other components of the Index, gas prices gained 2% as supplies were hit by annual Russian maintenance, while coal was flat on the month.
In July, the Bord Gáis Energy Index closed at 60.
David Grainger, Energy Trader with Bord Gáis Energy, said, “The Bord Gáis Energy Index rose 5% in July 2020, building further on the recovery in energy markets in recent months. The monthly gain would have been larger but for weakness in the dollar/euro exchange rate reducing the price performance of oil and coal. The key driver of performance in July was electricity which gained 16%, while gas prices were 2% higher.”
Oil climbs by $2.50 a barrel…
July continued to see oil prices climb back from the record lows seen in April when Covid-19 restrictions hit economic activity and consequently demand. The Brent crude benchmark gained $2.50 this month to settle at $43.68 a barrel. That was a gain of over 6% in dollar terms but only an increase of 2% in euro terms given the dollar’s weakness versus the single currency.
Increased economic activity, OPEC+ production restraint and falling US production have helped lift oil prices by over 70% in the past three months. However, caution remains the watchword as markets contemplate the effects of renewed virus outbreaks and the potential for further lockdowns.
Gas prices up 2%…
The NBP day-ahead contract, the price of gas for next day delivery, averaged 13.4p/th in July, a gain of almost 2% in euro terms.
The bullish trend in June continued in the first couple of weeks of July as day ahead and forward curve prices rose. A continuation of the rally in carbon prices, rising from €23 in early July to €30 by the middle of the month, was a contributory factor for higher gas prices in the first half of the month. Gas supply into Europe fell further in July as a key transport pipeline from Russia to Germany was closed for annual maintenance, while US exports of LNG into Europe were also lower.
Electricity gains 16% in July…
The average day-ahead price gained 16% going from €25.94/MWh in June to €30.07/MWh in July. The increase was the result of unplanned outages at key gas power stations plants coinciding with planned and extended outages at other plants. Prices peaked on Monday 20 July at €47.04/MWh, when two plants were on outage at the same time and wind levels were particularly low.
In addition, an 18% increase in the average carbon price over July supported power prices, with wind relatively static month on month filling 30% of outturn demand.
Coal prices flat in July and the euro hits a two-year high against the dollar…
Coal prices were flat on the previous month’s close, settling at $49.70 a tonne. However, the weakness of the dollar meant that in euro terms coal prices fell by around 5%. The euro gained versus the dollar settling 5% higher at $1.17, a two-year high, and fell marginally against the pound to settle at £0.907.
For more information, see the full Energy Index at bordgaisenergy.ie/energyindex/