March 2012 Energy Index - Bord Gáis Energy

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INDEX DOWN 3% AS WHOLESALE GAS AND ELECTRICITY PRICES FALL AND GLOBAL OIL PRICES STABILISE

After two months of rising prices, the price of a barrel of oil finally stabilised in March at the relatively high monthly average price of $125 per barrel, as the markets focused less on the threat and potential impact of a military engagement between the West and Iran.

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March 2012 Energy Index - Bord Gáis Energy

  1. 1. Bord Gáis Energy Index MARCH 2012G29839 BG Energy Index March 2012 Rev5 JJ.indd 1 11/04/2012 10:45
  2. 2. Bord Gáis Energy Index MARCH 2012 INDEX DOWN 3% AS WHOLESALE GAS AND ELECTRICITY PRICES FALL AND GLOBAL OIL PRICES STABILISE Bord Gáis Energy Index (Dec 31st 2009 = 100) OVERALL SUMMARY: 12 Month Rolling The Bord Gáis Energy Index fell 3% in March 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 as a return to milder weather following the 180 28 February 2009 87.77 severe conditions experienced in Continental 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 Europe in February put downward pressure 31 July 2009 31 August 2009 88.62 88.35 30 April 2010 95.31 on wholesale gas and electricity prices. 30 September 2009 85.76 31 May 2010 97.49 31 October 2009 92.39 30 June 2010 99.22 Falls in the average UK Day-ahead gas and 140 30 November 2009 94.82 Irish wholesale electricity were recorded 31 July 2010 101.09 31 December 2009 100.00 31 January 2010 99.62 31 August 2010 102.82 28 February 2010 103.17 30 September 2010 104.97 in March despite the dramatic news of Points 31 March 2010 104.57 31 October 2010 106.66 an uncontrolled gas leak at Total’s Elgin 30 April 2010 111.22 31 May 2010 110.49 30 November 2010 108.89 30 June 2010 111.64 platform in the North Sea towards the end 31 December 2010 111.88 31 July 2010 111.05 31 January 2011 114.76 31 August 2010 109.16 of the month. 100 30 September 2010 111.50 28 February 2011 117.91 31 October 2010 112.64 31 March 2011 121.41 30 November 2010 121.67 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 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 31 December 2011 140.15 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 -3% 3 Mth 7% 12 Mth 4% After two months of rising prices, the price of a barrel of oil finally stabilised in March at the relatively high monthly average price of $125 per barrel, as the markets focused less on the threat and potential impact of a military engagement between the West and Iran. During the month, the narrative subtly moved from one of imminent war and supply disruption, to the West’s ability to withstand a supply shock as attempts were made to reassure the markets that the world had adequate oil supplies to withstand the loss of Iranian crude. Concern continues to be voiced about the potential impact higher oil prices are having on consumer spending and inflation. A series of mixed economic releases and question marks about the strength of China’s economy also weighed on oil markets as traders consider the viability of the price of a barrel of Brent crude. Oil Index OIL Oil Graph After two months of rising prices, oil prices 180 Data 31 January 2009 28 February 2009 65.78 67.03 stabilised in March and traded consistently around $125 a barrel. With fewer reports 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 and statements to stoke fears that a military engagement between the West and Iran was 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 imminent, oil prices remained calm during 31 January 2010 94.62 the month. Points 28 February 2010 104.90 31 March 2010 112.38 30 April 2010 121.16 31 May 2010 30 June 2010 111.65 112.54 In previous months, oil prices had been 31 July 2010 110.19 pushed higher on fears that the world would 100 31 August 2010 108.17 have insufficient oil to meet its daily demand. 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 These concerns had a weaker influence on prices in March as markets digested 28 February 2011 149.07 31 March 2011 152.09 30 April 2011 156.15 31 May 2011 149.41 claims that Saudi Arabia could increase oil 60 30 June 2011 142.55 production immediately if required and 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 rumours that strategic reserves of oil were31 December 2011 31 January 2012 152.25 155.87 to be released onto the world market. This *Index adjusted for currency movements.31 February 2012 169.16 Data Source: ICE general confidence in future oil supplies was reflected in the decision by the US to allow oil-related sanctions to go ahead on 1 Mth 0% 3 Mth 11% 12 Mth 11% the belief that there is sufficient oil to fill the petroleum gap left by Iran. The markets also seem to have paused to consider the potentially negative impact of rising oil prices on future economic growth and the underlying strength of China’s economy following some negative economic releases and forecasts.G29839 BG Energy Index March 2012 Rev5 JJ.indd 2 11/04/2012 10:45
  3. 3. Bord Gáis Energy Index MARCH 2012 Natural Gas Index NATURAL GAS In February, following the severe weather 250 Natural experienced in Europe and concerns over Gas Graph Data 31 January 2009 28 February 2009 195.04 156.23 Russian gas supplies, the average Day-ahead gas price rose 20%. These dramatic increases 31 March 2009 99.24 30 April 2009 92.78 proved temporary in nature and were reversed 31 May 2009 87.00 200 30 June 2009 87.56 31 July 2009 76.34 31 August 200930 September 2009 69.43 61.72 somewhat in March as the average March 31 October 200930 November 2009 77.55 83.21 Day-ahead price fell 11% when compared to February. Points31 December 2009 100.00 31 January 2010 125.88 150 28 February 2010 114.44 A combination of weakening demand due to 31 March 2010 101.67 30 April 2010 106.04 31 May 2010 130.73 30 June 2010 31 July 2010 145.29 157.48 more seasonably mild weather (thus reducing 31 August 201030 September 2010 145.96 132.67 the need to burn gas to heat homes), healthy 100 supplies of gas from LNG terminals and imports 31 October 2010 148.5730 November 2010 167.11 from Norway, and relatively high stock levels, all31 December 2010 204.87 31 January 2011 188.31 28 February 2011 179.74 31 March 2011 30 April 2011 194.03 181.39 conspired to put downward pressure on prices. 31 May 2011 184.99 Despite the dramatic news of an uncontrolled 50 30 June 2011 183.36 31 July 2011 179.36 31 August 201130 September 2011 172.82 180.07 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 gas leak at Total’s Elgin platform in the North Sea toward the end of the month, prices failed 31 October 2011 180.1631 November 2011 191.5331 December 2011 189.94 31 January 2012 31 February 2012 184.35 221.68 *Index adjusted for currency movements. to react. Total are considering various options Data Source: Spectron Group to tackle the leak which could include taking six months to drill a relief well. A prolonged loss of gas throughout the summer should not be 1 Mth -11% 3 Mth 4% 12 Mth 2% a problem as supplies overall are sufficient to meet the reduced summer demand. Coal Index COAL European coal prices recovered slightly at the Coal Graph Data 260 end of March following months of subdued 31 January 2009 28 February 2009 102.58 93.02 activity and falling European prices. 31 March 2009 82.80 30 April 2009 78.58 Despite a late rally in prices toward the end 205 31 May 2009 76.19 30 June 2009 31 July 2009 76.68 81.48 of the month (which resulted in a $2 increase in the price of coal in the last week of March), 31 August 2009 84.15 30 September 2009 83.00 31 October 2009 86.26 30 November 2009 88.54 a bearish tone prevailed throughout the Points 31 December 2009 100.00 European/Atlantic market due to ample 150 31 January 2010 105.77 28 February 2010 95.28 supplies, high stockpiles, low demand for 31 March 2010 95.51 30 April 2010 108.11 31 May 2010 125.06 30 June 2010 31 July 2010 132.03 121.85 electricity and the beginning of spring and warmer weather. 31 August 2010 123.28 95 30 September 2010 121.29 31 October 2010 121.83 With Europe lacking an appetite for coal, 30 November 2010 150.34 31 December 2010 159.48 31 January 2011 148.31 28 February 2011 31 March 2011 149.34 153.91 supplies from the US and Colombia are now increasingly finding their way to the 30 April 2011 148.29 40 31 May 2011 145.75 Asian-Pacific region. As this region too is 30 June 2011 144.90 31 July 2011 147.62 31 August 2011 149.65 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 30 September 2011 31 October 2011 156.20 145.04 well supplied, regional prices of coal around the world continue to be soft. Given that 31 November 2011 142.82 31 December 2011 145.65 31 January 2012 134.66 *Index adjusted for currency movements. 31 January 2012 125.54 Data Source: ICE the world’s number one consumer of coal revised its GDP target to 7.5% (from 9-10% in the previous five years), the market will 1 Mth 1% 3 Mth -13% 12 Mth -18% be assessing any potential reduced Chinese demand will have on coal prices in the months ahead. Electricity Index Electricity Graph Data 180 ELECTRICITY 31 January 2009 28 February 2009 127.36 117.38 Irish wholesale electricity prices were 8% lower in March compared to February. 31 March 2009 89.56 30 April 2009 88.58 31 May 2009 82.33 30 June 2009 91.74 31 July 2009 83.00 A combination of lower gas (with the 140 31 August 2009 89.26 average monthly Day-ahead price falling 30 September 2009 87.28 31 October 2009 91.82 30 November 2009 93.65 11% in euro terms) and carbon (with the Points 31 December 2009 100.00 31 January 2010 105.32 average monthly price down approx 7% in 28 February 2010 98.50 31 March 2010 90.42 30 April 2010 93.24 31 May 2010 30 June 2010 105.19 104.88 the month) prices, put downward pressure 100 on wholesale electricity prices. 31 July 2010 106.05 31 August 2010 105.66 30 September 2010 109.05 31 October 2010 112.69 As the majority of electricity used in Ireland 30 November 2010 115.75 31 December 2010 136.21 31 January 2011 123.78 28 February 2011 31 March 2011 120.12 129.24 is produced by burning gas, internationally traded gas prices heavily influence Irish 30 April 2011 127.27 31 May 2011 118.10 30 June 2011 31 July 2011 31 August 2011 112.46 112.53 118.86 60 wholesale electricity prices. 30 September 2011 117.61 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 October 2011 114.14 31 November 2011 123.77 31 December 2011 119.63 31 January 2012 117.47 Data Source: SEMO 31 February 2012 125.14 1 Mth -8% 3 Mth -3% 12 Mth -10% G29839 BG Energy Index March 2012 Rev5 JJ.indd 3 11/04/2012 10:45
  4. 4. Bord Gáis Energy Index MARCH 2012 FX Rates FX RATES 31 January 2009 EUR/USD 1.283 31 January 2009 EUR/GBP 0.887 Despite the euro hitting a 16 month low 1.60 28 February 2009 31 March 2009 1.272 1.323 28 February 2009 31 March 2009 0.886 0.925 of 1.27 versus the US Dollar on the 16th of 30 April 2009 1.321 30 April 2009 31 May 2009 0.894 0.874 January, the currency rebounded to close at 1.33 versus the US Dollar at the end of 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 February. These gains were maintained in 30 September 2009 31 October 2009 1.464 1.474 31 October 2009 30 November 2009 0.896 0.913 March and the exchange rate finished the 1.20 30 November 2009 31 December 2009 1.498 1.433 31 December 2009 31 January 2010 0.888 0.867 month at 1.33. 28 February 2010 0.893 Confidence in the euro was supported 31 January 2010 1.389 31 March 2010 0.891 28 February 2010 1.360 1.00 by positive comments from the Italian 30 April 2010 0.868 31 March 2010 1.353 31 May 2010 0.846 30 April 2010 1.327 Prime Minister who believes that the euro 30 June 2010 0.819 31 May 2010 1.230 31 July 2010 0.831 30 June 2010 1.226 area’s woes are ‘almost over’ and that a 31 August 2010 0.827 31 July 2010 1.305 0.80 30 September 2010 0.866 1.269 solution to Greece’s challenges is almost 31 August 2010 31 October 2010 0.869 30 September 2010 1.362 30 November 2010 0.837 accomplished. This tone contrasted sharply 31 October 2010 1.392 31 December 2010 0.857 30 November 2010 1.304 31 January 2011 0.854 0.60 31 December 2010 31 January 2011 1.337 1.370 28 February 2011 31 March 2011 0.849 0.883 with a warning from the Federal Reserve 28 February 2011 31 March 2011 Jan-09 1.379 1.419 Apr-09 30 April 2011 Jul-09 31 May 2011 Oct-09 0.888 Jan-10 0.874 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Chairman Ben Bernanke who warned that 30 April 2011 1.483 30 June 2011 31 July 2011 0.903 0.875 ‘it’s far too early to declare victory’. 31 May 2011 1.437 31 August 2011 0.885 30 June 2011 31 July 2011 1.451 1.438 30 September 2011 31 October 2011 0.860 0.8615 The cautionary tone struck in the US 31 August 2011 30 September 2011 1.441 1.345 31 November 2011 0.8562 was echoed in the UK where the Bank of 1 Mth 0% 3 Mth 3% 12 Mth -6% EURUSD 31 December 2011 0.8334 31 October 2011 31 November 2011 1.395 1.3446 31 January 2012 31 February 2012 0.8302 0.8372 England’s Governor said that while the 31 December 2011 1.2961 ECB’s long-year loans created a window of 1 Mth 31 January 2012 31 January 2012 -1% 1.3084 1.3325 3 Mth 0% 12 Mth -6% EURGBP opportunity, it remains to be seen whether euro zone area officials will use the time to tackle the problems. MARKET OUTLOOK: Oil prices, having stabilised in March, will continue to be driven by events as they unfold between the West and Iran. Iran’s reaction to ongoing sanctions could set the tone for the markets in April. Should reported meetings occur between the leaders that defuse the situation, we should see prices ease back. A continued risk premium in the price of a barrel of oil will mean that institutions and politicians will be concerned about the impact higher energy costs is having on inflation, especially given the fragile state of the global economy. Economic releases from the world’s top two economies will be watched closely for evidence of growth in the US and a soft landing in China. In terms of gas prices, the weather, deliveries of gas, particularly of LNG cargos to the UK, and the markets assessment of the impact of the loss of gas due to the closure of the Elgin platform, will drive prices. 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. An 13.52% 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 consumption Electricity Coal data. 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 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.G29839 BG Energy Index March 2012 Rev5 JJ.indd 4 11/04/2012 10:45

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