Bord Gáis Energy Index                                                           DECEMBER 2011G29346 BGE Energy Index Dec ...
Bord Gáis Energy Index        DECEMBER 2011           THE BORD GÁIS ENERGY INDEX CLOSES 5% HIGHER IN 2011 AS              ...
Bord Gáis Energy Index        DECEMBER 2011        Natural Gas Index               250                                    ...
Bord Gáis Energy Index        DECEMBER 2011        FX Rates                                                               ...
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December 2011 Energy Index - Bord Gáis Energy

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Overall: A decrease in both gas and electricity prices drove the Bord Gáis Energy Index 1% lower for the month of December. The ongoing European sovereign debt crisis, fears about global economic growth in 2012 and a mild start to the winter across Ireland, the U.K. and Europe, all contributed to put downward pressure on gas and electricity prices. However, Ireland did not benefit fully from falls in fuel commodity prices as the euro weakened over the month.

The average price of Brent crude oil posted a record high in 2011 as daily oil demand hit a new high of 89 million barrels per day, as growing demand from the emerging market countries continued. Prices were also supported by concerns about supply from the Middle East and North Africa. As a result, the Bord Gáis Energy Index now stands at 143, which is 5% higher than in December 2010.



The following are the key trends recorded for the month of December:



Oil: The oil element of the Index was up 1% to 152. Due to the ongoing European sovereign debt concerns, the possibility of a European recession in 2012 and fears of further ratings downgrades. In US dollar terms, oil prices weakened in December. However, euro zone buyers of oil, such as Ireland, did not benefit fully from this fall as the euro weakened significantly versus the US dollar. Because of this, in euro terms, the cost of oil increased by 1%.



Natural Gas: The natural gas element of the Index was down 1% to 189. A mild start to the winter across Ireland, the U.K. and mainland Europe, depressed demand in December and has resulted in relatively high stock levels for this time of the year. This put downward pressure on prices over the month. Temperatures above seasonal norms in December reduced demand for gas-fired central heating and the holiday season also lead to the seasonal slowdown of many businesses and industry. The ongoing European sovereign debt crisis is also weighing on prices as it is now likely that Europe will burn less gas in 2012 as activity and production slows.



Coal: The coal element of the Index was up 2% to 145. In US dollar terms, coal prices fell in December as the world experienced an oversupply of coal. Economic uncertainties and a comparatively mild winter is restricting European demand. However, euro zone buyers of coal, such as Ireland, did not benefit fully from the fall in international coal prices as the euro weakened significantly versus the US dollar. Because of this, in euro terms, the cost of coal increased by 2% over the month.



Electricity: The electricity element of the Index was down 4% to 118. The average wholesale Irish electricity price for December closed 4% lower than its November equivalent as unseasonably mild weather and reduced demand for electricity pushed prices downwards. In addition, as the cost of gas and carbon reduced in the month, the cost of producing electricity fell. The availability of hydro and wind power put additional downward pressure on price

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December 2011 Energy Index - Bord Gáis Energy

  1. 1. Bord Gáis Energy Index DECEMBER 2011G29346 BGE Energy Index Dec 2011 LK.indd 1 06/01/2012 11:49
  2. 2. Bord Gáis Energy Index DECEMBER 2011 THE BORD GÁIS ENERGY INDEX CLOSES 5% HIGHER IN 2011 AS AVERAGE OIL PRICE RECORDED A 150-YEAR HIGH - INDEX DROPS 1% IN DECEMBER REFLECTING GLOBAL ECONOMIC UNCERTAINTY Bord Gáis Energy Index (Dec 31st 2009 = 100) OVERALL SUMMARY: The average price of Brent crude oil posted Bord Gáis Energy Index 12 Month Rolling Average a record high in 2011 as daily oil demand hit a 180 new high of 89 million barrels per day, owing primarily to growth from emerging market countries. Prices were also supported by concerns about supply from the Middle East and North Africa. As a result, the Bord Gáis 140 Energy Index closed the year 5% higher. Points 100 60 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 1 Mth -1% 3 Mth 6% 12 Mth 5% From month to month, the Index for December recorded a 1% drop due to the ongoing European sovereign debt concerns, fears about global economic growth in 2012 and a mild start to the winter across Ireland, Britain and Europe, all of which put downward pressure on gas and electricity prices. However, Ireland did not benefit fully from falls in fuel commodity prices as the euro weakened over the month. This meant that in euro terms, oil and coal prices in fact increased over the month. Ominously, tensions between the West and Iran raised the possibility of military engagement and oil supply disruptions as there is now a possibility that the Strait of Hormuz could be closed, a narrow passage through which 40% of global oil supplies pass through. Oil Index OIL Due to the ongoing European sovereign 180 debt concerns, the possibility of a European recession in 2012 and fears of further ratings downgrades, in US dollar terms, oil prices weakened in December. However, euro zone buyers of oil, such as Ireland, did 140 not benefit fully from this fall as the euro weakened significantly versus the US dollar. Points Because of this, in euro terms, the cost of oil increased by 1%. 100 Prices were supported due to the escalation in tensions between the West and Iran over its nuclear programme. Military engagement and the possibility of oil supply 60 disruptions supported oil prices somewhat. Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Furthermore, data from the US in December *Index adjusted for currency movements. Data Source: ICE reconfirmed the view that the economy there is expanding moderately. 1 Mth 1% 3 Mth 8% 12 Mth 17%G29346 BGE Energy Index Dec 2011 LK.indd 2 06/01/2012 11:49
  3. 3. Bord Gáis Energy Index DECEMBER 2011 Natural Gas Index 250 NATURAL GAS The average December Day-ahead gas price was lower than its November equivalent by 1%. Despite a brief period 200 where cold and stormy weather bore down on the UK and some disruptions Points to UK gas supplies from Norway, the 150 December average Day-ahead gas price softened. A mild start to the winter across the British Isles and Europe, has resulted in very healthy stock levels which also 100 applied downward pressure on prices. Temperatures rose to above seasonal 50 norms in the second half of the month, Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 *Index adjusted for currency movements. which reduced demand for gas-fired Data Source: Spectron Group central heating and depressed prices. The holiday season also resulted in reduced demand from businesses and industry. 1 Mth -1% 3 Mth 5% 12 Mth -8% The ongoing European sovereign debt crisis is also weighing on prices as it is now likely that Europe will burn less gas in 2012 Coal Index as activity and production slows. COAL 260 In US dollar terms, coal prices fell in December as the world experiences an oversupply of coal. Economic uncertainties 205 and a comparatively mild winter is restricting European demand. Chinese Southern ports are reportedly very well Points 150 supplied with significant quantities of Australian and South African coal, and Chinese power companies are finding it increasingly difficult to access credit to 95 purchase additional quantities. Indian buyers are also absent from the market as industrial production slows and a 40 weakening Indian rupee makes US dollar priced oil more expensive. Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 *Index adjusted for currency movements. Data Source: ICE However, euro zone buyers of coal, such as Ireland, did not benefit fully from this fall as 1 Mth 2% 3 Mth -7% 12 Mth -9% the euro weakened significantly versus the US dollar. Because of this, in euro terms, the cost of coal increased by 2% over the month. Electricity Index 180 ELECTRICITY The average wholesale Irish electricity price for December closed 4% lower than its November equivalent as unseasonably mild weather and reduced demand for 140 electricity put downward pressure on prices. Points In addition, as the cost of gas and carbon became cheaper in the month, the cost of 100 producing electricity fell. The availability of cheap hydro and wind power put additional downward pressure on prices. 60 Wholesale prices could have fallen further Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 but for a number of outages of efficient Data Source: SEMO generators and an increased use of expensive peaker units to supply short bursts of electricity. 1 Mth -4% 3 Mth 1% 12 Mth -13%G29346 BGE Energy Index Dec 2011 LK.indd 3 06/01/2012 11:49
  4. 4. Bord Gáis Energy Index DECEMBER 2011 FX Rates FX RATES 1.60 In December, the euro hit a 15 month low versus the US Dollar. Despite hopes of a 1.40 solution to the euro zone crisis emerging from the latest crunch EU summit, the mood quickly soured and concerns again 1.20 mounted about the economic prospects of European region and the future of its currency. 1.00 Investors in turn favoured the safe haven of the US Dollar and the currency 0.80 appreciated versus the euro in the month. These concerns also lead to a weakening of the euro versus the Pound sterling. 0.60 Some fuel commodities are priced in US Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Dollars (oil and coal) and in the Pound sterling (gas). 1 Mth -4% 3 Mth -4% 12 Mth -3% EURUSD 1 Mth -2% 3 Mth -3% 12 Mth -3% EURGBP MARKET OUTLOOK: There are a number of strong influences that are putting downward pressure on fuel commodities such as the apparent inability of European leaders to offer a solution to the crisis that convinces the markets, fears of a slowing global economy in 2012 and mild weather (which is reducing the need for heating). Should the euro continue to weaken versus the US dollar, euro zone buyers will not benefit fully from any price falls and would have to pay even more should prices increase. Given the economic weakness within the region, a softening euro has the potential to inflate European energy costs. These downward pressures are being counteracted somewhat however by the escalation of international tensions due to Iran’s nuclear programme which may apply upward pressure to oil and consequently all fuel commodity prices should the situation get more treatening in 2012. RE-WEIGHTING OF BORD GÁIS ENERGY INDEX: Following the SEAI’s 2009 review of energy consumption in Ireland, 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 oil consumption in the form of gasoline and diesel. This reflects the economic downturn experienced at the time. The share of natural Gas gas and electricity increased by 0.63% and 0.57% respectively. 13.52% An increase in the use of renewables and peat, at the expense of coal in electricity generation was also observed. As a result the Bord Gáis Energy Index has been reweighted to reflect the latest Electricity Coal consumption data. This has had a minimal effect on the overall 18.40% 3.16% shape of the Index, but may indicate future trends. For more information please contact: Fleishman-Hillard - Aidan McLaughlin - 085 749 0484 Bord Gáis Energy - Christine Heffernan - 087 050 5555 Disclaimer: The contents of this report are provided solely as an information guide. The report is presented to you “as is” and may or may not be correct, current, accurate or complete. While every effort is made in preparing material for publication no responsibility is accepted by or on behalf of Bord Gáis Eireann, the SEMO, ICE Futures Europe, the Sustainable Energy Authority of Ireland or Spectron Group Limited (together, the “Parties”) for any errors, omissions or misleading statements within this report. No representation or warranty, express or implied, is made or liability accepted by any of the Parties or any of their respective directors, employees or agents in relation to the accuracy or completeness of the information contained in this report. Each of the Parties and their respective directors, employees or agents does not and will not accept any liability in relation to the information contained in this report. Bord Gáis Eireann reserves the right at any time to revise, amend, alter or delete the information provided in this report.G29346 BGE Energy Index Dec 2011 LK.indd 4 06/01/2012 11:49

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