Wholesale gas prices in May are down 37% year on year despite a slight rebound over the last month, according to the latest Wholesale Energy Market Report published by Vayu Energy.
The company, which earlier this year announced its expansion into Northern Ireland, states that the collapse in prices over the last twelve months is due to ongoing over-supply of gas in Europe and reduced demand.
The average day-ahead price for gas – the contract for gas delivery for tomorrow – is 30.06 pence per therm (p/th) so far in May, close to the ten-year lows experienced earlier this year. This compares with average prices of 44.07p/th in May 2015 and of 29.47p/th last month.
Wholesale gas prices are now 42% lower compared with the average monthly price recorded for May over the previous three years (2013-2015). This is having a significant impact on the energy costs of many businesses in Northern Ireland purchasing gas on the wholesale market, particularly for users in the industrial and commercial segment.
Joanne Daly, Senior Energy Analyst at Vayu notes that despite the overall weakness in the market, prices increased by 2% in May compared to April due to a number of factors including unplanned outages in the North Sea and colder weather spells during the month.
Commenting on the outlook for prices this summer, Ms Daly said: “While Norwegian gas production remains very strong by historic standards for this time of year, the Norwegian maintenance season is due to commence. Planned outages at a number of large gas fields could greatly reduce the flexibility of the system and contribute to price volatility. However this should be offset by continued robust supply of LNG (liquefied natural gas) from the Middle East which will help the system meet demand.”
“The Norwegian maintenance also coincides with the UK’s largest storage facility going offline until the end of June. This will result in a significant reduction in storage injections during the period, thereby reducing demand within the system when supply sources could be tight,” says Ms Daly. “Overall, however, healthy supplies and lower demand due to warmer weather means we could see prices drop during the summer months.”