Irish wholesale gas prices on average were down 28% year on year, according to the latest Wholesale Energy Market Report published by Vayu Energy.  The company, which supplies gas to 20% of Ireland’s industrial and commercial market, states that the drop in prices year on year is due to strong LNG supply and pipeline flows from the North Sea, low demand and overall bearish fundamentals.

The average day-ahead price for gas – the contract for gas delivery for tomorrow – was 1.48c/kWh  (cents per kilowatt hour) in June, compared to 1.31c/kWh last month, an increase of 11%. 

Commenting on the outlook for the remainder of the year, Joanne Daly, Senior Energy Analyst at  Vayu states:  “Volatility returned to the NBP in June due to a number of factors; unplanned North Sea outages, the Rough storage facility being taken offline and Brexit. Volatility tied to these events is likely to continue over the coming weeks. 

“Storage levels in particular are likely to be a key driver of costs over the coming months” Ms Daly states.  “Storage fullness is currently at 42.5%, almost 2% above last year’s levels.  However, these levels are likely to stagnate due to the recent announcement that the Rough storage facility, which accounts for 70% of the UK’s total storage capacity, will be unavailable for injections until at least August 3rd. The Winter-16 contract reacted to this news by climbing by over 3p day on day and is currently trading at 44p.  The lowest this contract traded at was 31.7p, recorded on 20 January 2016.  

The prospect of low storage levels is a risk for the winter period and we may see further bullish pressure exerted on the Winter-16 contract and beyond because of this. The market will look to alternatives, such as Norwegian pipeline supply and Liquefied Natural Gas (LNG), to plug this gap.  Yet in the face of a further Dutch North Sea production cap, as well as uncertainty surrounding LNG deliveries over the summer, even the alternatives are risky”.