February 2012 Energy Index - Bord Gáis Energy

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A 9% increase in oil prices and a 20% increase in gas prices pushed the Bord Gáis Energy Index up 8% in February. The combination of rising geopolitical tensions, supply constraints, rising energy demand, a weaker US Dollar and improving market confidence, resulted in the price of a barrel of Brent oil hitting an all time record in euro terms during the month. Gas prices also rose dramatically due to the severe winter weather experienced across Continental Europe. As a result, prices hit levels not seen since 2006.

The Bord Gáis Energy Index now stands at a record high for the Index of 157.

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February 2012 Energy Index - Bord Gáis Energy

  1. 1. Bord Gáis Energy Index February 2012
  2. 2. Bord Gáis Energy Index FEBRUARY 2012 THE BORD GÁIS ENERGY INDEX INCREASES 8% IN FEBRUARY – INDEX 11% HIGHER THAN IN FEBRUARY 2011 – Bord Gáis Energy Index (Dec 31st 2009 = 100) OVERALL SUMMARY: 12 Month Rolling The Bord Gáis Energy Index rose 8% in Energy Average Index Graph Data 31 October 2009 87.80 31 January 2009 92.10 Bord Gáis Energy Index 30 November 2009 87.15 12 Month Rolling Average the month with record oil and gas prices 180 28 February 2009 87.77 being recorded. A confluence of perfect 31 December 2009 88.29 31 March 2009 76.86 31 January 2010 88.92 30 April 2009 77.63 31 May 2009 30 June 2009 84.37 90.81 28 February 2010 31 March 2010 90.20 92.51 factors from geopolitical tensions, supply 31 July 2009 31 August 2009 88.62 88.35 30 April 2010 95.31 constraints, rising demand, a weaker US 30 September 2009 31 October 2009 85.76 92.39 31 May 2010 30 June 2010 97.49 99.22 Dollar and improving market confidence, resulted in the price of a barrel of Brent 140 30 November 2009 94.82 31 July 2010 101.09 31 December 2009 100.00 oil hitting an all time record in euro terms. 31 January 2010 99.62 31 August 2010 102.82 28 February 2010 103.17 30 September 2010 104.97 Points Gas prices rose dramatically early in the 31 March 2010 104.57 31 October 2010 106.66 30 April 2010 111.22 31 May 2010 110.49 30 November 2010 108.89 30 June 2010 31 July 2010 111.64 111.05 31 December 2010 111.88 month due to severe winter weather across 31 August 2010 109.16 31 January 2011 114.76 continental Europe and prices hit levels not 100 30 September 2010 111.50 28 February 2011 117.91 31 October 2010 30 November 2010 112.64 121.67 31 March 2011 121.41 seen since 2006. 30 April 2011 124.45 31 December 2010 135.86 31 January 2011 134.21 31 May 2011 126.97 28 February 2011 140.96 30 June 2011 128.88 31 March 2011 146.51 31 July 2011 131.18 30 April 2011 147.76 31 May 2011 140.73 31 August 2011 133.64 60 30 June 2011 134.54 30 September 2011 135.59 31 July 2011 138.57 31 October 2011 137.54 31 August 2011 138.69 30 September 2011 134.89 31 November 2011 139.53 31 October 2011 136.14 Jan-09 Apr-09 Jul-09 31 December 2011 Oct-09 Jan-10 140.15 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 31 November 2011 143.88 31 January 2012 141.01 31 December 2011 143.22 31 January 2012 144.43 31 February 2012 142.38 31 February 2012 156.81 1 Mth  8% 3 Mth  9% 12 Mth  11% During 2011, despite record global demand and uncertainties over supplies from North Africa and the Middle East due to the Arab Spring, Brent oil appeared unable to break out of the $100-$120 range for any length of time. However, in February, oil prices increased by nearly $12 and closed above the significant $120 a barrel price for 9 days. Cold weather and worries over the reliability of Russian gas supplies sent European, and in turn, UK traded gas prices soaring early in February to above £1 a therm. These prices did ease to more normal levels as the weather and supplies improved but the monthly average price out turned 20% higher month on month following a very mild January. Oil Index OIL Oil Graph As tensions between the West and Iran over 180 Data 31 January 2009 28 February 2009 65.78 67.03 its nuclear programme escalated in February, oil prices hit new record highs in euro and 31 March 2009 68.43 30 April 2009 70.72 31 May 2009 85.34 30 June 2009 31 July 2009 90.70 92.57 British Pound terms. Oil began the month at $111 and ended it at $123 and hit a nine month 31 August 2009 89.31 30 September 2009 86.74 140 31 October 2009 93.84 30 November 2009 31 December 2009 96.36 100.00 high of $125. 31 January 2010 94.62 Points 28 February 2010 31 March 2010 30 April 2010 104.90 112.38 121.16 There were a number of events which suggest 31 May 2010 30 June 2010 111.65 112.54 to the market that the possibility of a military 31 July 2010 31 August 2010 110.19 108.17 engagement with Iran is a little more likely. 100 Fears that this would disrupt global supplies 30 September 2010 111.13 31 October 2010 109.88 30 November 2010 121.18 31 December 2010 31 January 2011 130.36 135.62 of oil and gas pushed prices up. Firstly, Iran made an unexpected announcement 28 February 2011 149.07 31 March 2011 152.09 30 April 2011 156.15 31 May 2011 30 June 2011 149.41 142.55 that it was to halt oil exports to British and 60 French companies. Secondly, inspectors 31 July 2011 149.27 31 August 2011 146.57 30 September 2011 140.51 31 October 201131 November 2011 144.47 151.05 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 were refused access to nuclear facilities.31 December 2011 31 January 2012 152.25 155.87 Thirdly, a UN report claimed that Iran has *Index adjusted for currency movements.31 February 2012 169.16 Data Source: ICE sharply increased its production of enriched uranium. Suspicion remains that there is a possible military dimension to Iran’s nuclear 1 Mth  9% 3 Mth  12% 12 Mth  14% programme. Economic releases continue to suggest that the global economy is recovering slowly and this also supported oil prices.
  3. 3. Bord Gáis Energy Index FEBRUARY 2012 Natural Gas Index NATURAL GAS Due to the severe weather experienced 250 Natural Gas Graph in Europe and concerns over Russian gas Data 31 January 2009 195.04 28 February 2009 31 March 2009 156.23 99.24 supplies, in the first week of February, Day- ahead prices hit their highest level in more 30 April 2009 92.78 31 May 2009 87.00 200 30 June 2009 87.56 31 July 2009 31 August 2009 76.34 69.43 than 6 years on the UK gas trading hub30 September 2009 31 October 2009 61.72 77.55 83.21 at over £1 a therm. The Day-ahead price remained high during the exceptional cold30 November 200931 December 2009 100.00 Points 31 January 2010 125.88 snap that saw an increase in demand for 150 28 February 2010 114.44 31 March 2010 101.67 gas-fired heating and which tested supplies. 30 April 2010 106.04 31 May 2010 130.73 30 June 2010 145.29 31 July 2010 31 August 2010 157.48 145.96 During this period, continental Europe sought exports from the UK to compensate30 September 2010 132.67 31 October 2010 148.5730 November 201031 December 2010 31 January 2011 167.11 204.87 188.31 100 for reduced deliveries from the east and prices escalated. 28 February 2011 179.74 31 March 2011 194.03 30 April 2011 181.39 31 May 2011 184.99 30 June 2011 183.36 The average Day-ahead gas price in February 50 31 July 2011 179.36 31 August 201130 September 2011 172.82 180.07 when compared to January was up 20%. 31 October 2011 180.16 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 As temperatures improve, prices at the31 November 2011 191.5331 December 2011 189.94 31 January 2012 184.35 *Index adjusted for currency movements. 31 February 2012 221.68 Data Source: Spectron Group UK trading hub did ease back to levels between 57–60 p a therm with demand but conservation of stock levels, declining LNG 1 Mth  20% 3 Mth  16% 12 Mth  23% deliveries to the UK and storage facility outages, continued to support prices. Coal Index Coal European coal prices fell 7% in February Coal Graph Data 260 as stockpiles at European generators and 31 January 2009 102.58 discharge terminals remained high. Indeed, because of the high coal stocks, European 28 February 2009 93.02 31 March 2009 82.80 30 April 2009 78.58 prices failed to react at all to the severe weather 205 31 May 2009 76.19 30 June 2009 76.68 31 July 2009 31 August 2009 81.48 84.15 early in February. This was in stark contrast to natural gas which absorbed much of the shock 30 September 2009 83.00 31 October 2009 86.26 30 November 2009 88.54 because of the lack of supplies from Russia. Points 31 December 2009 100.00 31 January 2010 105.77 28 February 2010 31 March 2010 95.28 95.51 150 A strengthening energy commodities market and improving economic sentiment also failed 30 April 2010 108.11 31 May 2010 125.06 30 June 2010 132.03 31 July 2010 31 August 2010 121.85 123.28 to put any upward pressure on prices. 30 September 2010 121.29 95 During the month, coal prices fell to a 16 31 October 2010 121.83 30 November 2010 150.34 31 December 2010 31 January 2011 159.48 148.31 month low to trade below $100/mt for most of the month. Prices have been falling steadily 28 February 2011 149.34 31 March 2011 153.91 30 April 2011 148.29 31 May 2011 145.75 since September when they were trading at 40 30 June 2011 144.90 31 July 2011 31 August 2011 147.62 149.65 over $126/mt. It is felt that the market would Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 require one to two months of sustained cold 30 September 2011 156.20 31 October 2011 145.04 31 November 2011 142.82 31 December 2011 31 January 2012 145.65 134.66 *Index adjusted for currency movements. weather to erode stocks sufficiently to put 31 January 2012 125.54 Data Source: ICE upward pressure on prices but this is now unlikely given that the winter is behind us. 1 Mth  -7% 3 Mth  -12% 12 Mth  -16% There were also no palpable signs that Chinese buyers were back in the markets during February following the country’s Lunar New Year festivities. Electricity Index Electricity Graph Data 180 ELECTRICITY 31 January 2009 28 February 2009 127.36 117.38 Irish wholesale electricity prices were 5% higher in February compared to January. 31 March 2009 89.56 30 April 2009 88.58 31 May 2009 82.33 30 June 2009 31 July 2009 91.74 83.00 A combination of higher gas (with the average monthly Day-ahead price rising 31 August 2009 89.26 140 30 September 2009 87.28 31 October 2009 91.82 30 November 2009 31 December 2009 93.65 100.00 20% in euro terms) and carbon (with the Points average monthly price up approx 20% in 31 January 2010 105.32 28 February 2010 98.50 31 March 2010 90.42 30 April 2010 31 May 2010 93.24 105.19 the month) prices, increased wholesale electricity prices. 30 June 2010 104.88 106.05 100 31 July 2010 31 August 2010 105.66 30 September 2010 109.05 31 October 2010 30 November 2010 31 December 2010 112.69 115.75 136.21 As the majority of electricity used in Ireland 31 January 2011 28 February 2011 123.78 120.12 is produced by burning gas, internationally 31 March 2011 30 April 2011 31 May 2011 129.24 127.27 118.10 traded gas prices heavily influence Irish wholesale electricity prices. 60 30 June 2011 112.46 31 July 2011 112.53 31 August 2011 118.86 Despite the significant increase in the cost 30 September 2011 117.61 31 October 2011 114.14 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 31 November 2011 123.77 31 December 2011 31 January 2012 119.63 117.47 Data Source: SEMO of producing electricity, wholesale prices were restrained somewhat due to subdued 31 February 2012 125.14 demand as a result of mild weather in 1 Mth  5% 3 Mth  1% 12 Mth  4% Ireland.
  4. 4. Bord Gáis Energy IndexFEBRUARY 2012 FX Rates FX RATES 31 January 2009 EUR/USD 1.283 31 January 2009 EUR/GBP 0.887 During February, the euro gained against 1.60 28 February 2009 31 March 2009 1.272 1.323 28 February 2009 31 March 2009 0.886 0.925 most major world currencies including 30 April 2009 1.321 30 April 2009 31 May 2009 0.894 0.874 the British Pound and US Dollar. Given the currency movements observed, it would 31 May 2009 1.412 30 June 2009 0.853 1.40 30 June 2009 1.405 31 July 2009 0.853 31 July 2009 31 August 2009 1.424 1.434 31 August 2009 30 September 2009 0.881 0.914 appear that the markets perceive that,30 September 2009 31 October 2009 1.464 1.474 31 October 2009 30 November 2009 0.896 0.913 although not resolved, progress has been 1.2030 November 200931 December 2009 1.498 1.433 31 December 2009 31 January 2010 0.888 0.867 made toward dealing with the sovereign 31 January 2010 1.389 28 February 2010 31 March 2010 0.893 0.891 credit crisis in Europe. This perception was boosted in the month following agreement 28 February 2010 1.360 30 April 2010 0.868 1.00 31 March 2010 1.353 31 May 2010 0.846 30 April 2010 31 May 2010 1.327 1.230 30 June 2010 0.819 from Brussels to provide Greece with an 31 July 2010 0.831 30 June 2010 31 July 2010 1.226 1.305 31 August 2010 0.827 additional bailout worth €130 billion. 30 September 2010 0.866 0.80 31 August 201030 September 2010 1.269 1.362 31 October 2010 30 November 2010 0.869 0.837 Despite the euro hitting a 16 month low of 1.27 versus the US Dollar on the 16th 31 October 2010 1.392 31 December 2010 0.85730 November 2010 1.304 31 January 2011 0.85431 December 2010 1.337 28 February 2011 0.849 of January, the currency has rebounded 0.60 31 January 2011 28 February 2011 1.370 1.379 31 March 2011 30 April 2011 0.883 0.888 to close at 1.33 versus the US Dollar on 31 March 2011 Jan-09 1.419 Apr-09 Jul-09 Oct-09 Jan-10 31 May 2011 0.874 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 30 April 2011 1.483 30 June 2011 31 July 2011 0.903 0.875 29 Feb. In fact, the US Dollar weakened against most major currencies in February 31 May 2011 1.437 31 August 2011 0.885 30 June 2011 1.451 30 September 2011 0.860 31 July 2011 31 August 2011 1.438 1.441 31 October 2011 31 November 2011 0.8615 0.8562 and this decline tends to boost the allure30 September 20111 Mth  31 October 2011 1.345 2% 1.395 3 Mth  31 December 2011 31 January 2012 -1% 0.8334 0.8302 12 Mth  -3% EURUSD of investments priced in US Dollars,31 November 201131 December 2011 1.3446 1.2961 31 February 2012 0.8372 including oil. Increasing risk appetite and a1 Mth  1% 3 Mth  -2% 12 Mth  -1% commitment from the US Federal Reserve EURGBP 31 January 2012 1.3084 to keep interest rates low is weighing on 31 January 2012 1.3325 the US Dollar.Market Outlook:With oil prices rising $12 during February, Governments and institutions are starting to raise concerns for the first time aboutthe effect this may have on consumer spending (particularly in the US and particularly in the year of a presidential election),the fragile economic growth and inflation. During the month, European inflation accelerated 2.7% and estimates are forthe euro-region economy to shrink moderately in 2012. Rising energy costs threaten to weaken the region’s economy byreducing the purchasing power of companies and consumers. Despite these concerns, oil prices will continue to be drivenmainly by the market’s perception of tensions between the West and Iran and the likelihood or otherwise of a militaryengagement. Supply/demand dynamics and developments in foreign exchange will continue to influence prices. Marketswill also continue to monitor the state of the world’s major economies through economic releases which have been generallypositive so far in 2012.In terms of gas prices, markets will be hoping for greater deliveries of LNG to Britain and increased supplies of gas fromstorage to the market.re-weighting of bord gáis energy index:Following the SEAI’s 2009 review of energy consumption inIreland, released in Q4 2010, there was a 9.3% drop in overall Oil 64.93%energy consumption. The most notable drop of 1.39% was in oilconsumption in the form of gasoline and diesel. This reflects theeconomic downturn experienced at the time. The share of natural Gasgas and electricity increased by 0.63% and 0.57% respectively. An 13.52%increase in the use of renewables and peat, at the expense of coal inelectricity generation was also observed. As a result the Bord GáisEnergy Index has been reweighted to reflect the latest consumption Electricity Coaldata. This has had a minimal effect on the overall shape of the Index, 18.40% 3.16%but may indicate future trends.For more information please contact: Fleishman-Hillard — Aidan McLaughlin — 085 749 0484 Bord Gáis Energy — Christine Heffernan — 087 050 5555Disclaimer:The contents of this report are provided solely as an information guide. The report is presented to you “as is” and may or maynot be correct, current, accurate or complete. While every effort is made in preparing material for publication no responsibilityis accepted by or on behalf of Bord Gáis Eireann, the SEMO, ICE Futures Europe, the Sustainable Energy Authority of Irelandor Spectron Group Limited (together, the “Parties”) for any errors, omissions or misleading statements within this report. Norepresentation or warranty, express or implied, is made or liability accepted by any of the Parties or any of their respectivedirectors, employees or agents in relation to the accuracy or completeness of the information contained in this report. Each of theParties and their respective directors, employees or agents does not and will not accept any liability in relation to the informationcontained in this report. Bord Gáis Eireann reserves the right at any time to revise, amend, alter or delete the information providedin this report.

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