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Wholesale gas prices down a third in yr

Monday, August 25 10:29:16

Wholesale gas prices are down 33pc this summer compared to the same time last year, according to the latest Wholesale Energy Market Report by Irish energy supplier Vayu.

While prices increased slightly at the start of August, they have fallen back in recent days but have not managed to fully offset the risk premium built in due to supply uncertainty from Russia.

The slump in prices is being driven by significantly lower-than-average demand for gas since the beginning of the year due to warmer weather conditions and increased shipments of LNG (liquefied natural gas) from major suppliers such as Qatar.

This has resulted in substantially increased gas inventories in the UK market, which is the major source of gas supply into Ireland. Total UK storage is now at 91pc capacity while storage levels across Europe are currently 83pc full.

The report shows a positive outlook for European supplies for the winter period, with the only risk coming from concern that Russian gas supply through Ukraine could turn down at some point. Prices for next-day delivery finished trading on Friday (22nd August) at 41.4p, down 37pc since the beginning of the year and 33pc lower than at the same point last summer.

Joanne Daly, Senior Energy Analyst at Vayu says: "We saw a small increase in gas prices at the start of the month due to a number of unplanned gas infrastructure outages. Increased demand for gas from generators of electricity has also been a factor. That said, the market remains fundamentally bearish in the near term given the positive supply outlook and substantial storage levels built up since January."

"While reduced demand and healthy storage levels are acting as a cushion against geopolitical risks, the market continues to factor in a significant risk premium for gas contracts due to expire over the next three months," says Ms Daly. "Any escalation of unrest in the Ukraine would result in higher prices, particularly for gas contracts further out than one month."

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