Irish wholesale gas prices are down 35% on average in July 2016 compared with July 2015, according to the latest Wholesale Energy Market Report published by Vayu Energy. These losses continue to be attributed to on-going healthy supply, decreased demand year on year and the drop in oil prices.

Prices are down 7% compared to last month, mainly due to the strength of the euro against sterling. However some price support is coming from unplanned outages and the announcement that the UK’s largest storage facility will be offline until early 2017.

The average day-ahead price for gas – the contract for gas delivery for tomorrow – was 1.37c/kWh (cents per kilowatt hour) in July, compared to 1.48c/kWh in June.

Commenting on the outlook for the remainder of the year Gillian Lawler, Senior Energy Analyst at Vayu said: “The market reaction to Brexit continued to be felt in early July on gas prices for delivery to year end, as the pound continued its poor performance against the euro. Traders were anxious to mitigate currency risk amid the uncertainty surrounding the UK’s vote to leave the EU. When the euro strengthens against sterling it makes trading in sterling markets more attractive for those with euro to spend, thereby increasing activity in markets like the NBP*.

July has been plagued with North Sea field outages, planned and unplanned, and while prices have dropped this month, we have not seen the decline in prices that we might otherwise have expected the further we get into summer, and prices are yet to soften significantly in response to the increased availability of LNG (liquefied natural gas) in the UK. LNG has been playing a key role during planned and unplanned maintenance and in filling the supply gap as more and more gas goes towards the Continent. LNG send-out has risen by 144% month on month in the UK. Regarding long-term LNG supply, Qatar is striking new supply deals aimed at sustainable access to the Northwest European market.

Ms Lawler also states that the Rough storage facility outage, scheduled to last until March/April 2017, puts additional risk on winter prices. “The Rough storage facility plays a key role during winter, housing 70% of the UK’s storage capacity. The UK will need to secure supply from elsewhere to plug this supply gap, most likely from mainland Europe. LNG and Norwegian supply will be vital in meeting peak demand also”.