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The Bord Gáis Energy Index (BGEI),
an Irish-specific index designed to measure the prices in the wholesale energy
market, increased by 8% in November, to 121.
This increase was due to a combination of higher commodity prices (following
greater energy demand during the earlier-than-expected colder weather) and a
weakening of the euro.
The index is designed to track movement in the wholesale energy market and
comprises the four key energy commodities of oil, gas, coal and electricity. The
index tracks the monthly price movements of these commodities, factoring in any
currency shifts, and producing an overview and insight into the energy sector.
Launched in May of this year, the new Energy Index is the first initiative of
its kind in the Irish market.
The following are the key trends recorded for the month
After a high of $89.70 per barrel mid-November (due to positive macroeconomic
data, a higher revision of global demand estimates by the International Energy
Agency (IEA) and the US-based Energy Information Administration (EIA), and a
draw on crude inventories), the price of oil reduced to $86 per barrel at the
end of the month following a strengthening of the US dollar and concerns on
European sovereign debt. · Natural Gas: Prices remained relatively stable (45 to
47 p/therm) for the first half of November, before rising (to a monthly high of
55 p/therm, due to higher demand in light of the cold weather.
European coal stocks fell steadily in early-November due to strong demand and a
combination of heavy rainfall in Columbia and a shortage of rail cars in Russia
which restricted deliveries. In the final days of November, prices rose to over
$114 per metric tonne due to bullish sentiment over rising fuel prices. An
increase in coal demand in China coincided with supplies in Australia being
delayed by heavy rain.
Irish electricity prices only slightly increased in November (to €57/MWh, up
from €55/MWh in October) despite the cold weather and a marked increase in
demand. Notwithstanding the modest rise, evening prices increased more
significantly as more units produced power to meet increasing peak-time demand.
However, this rise was balanced by a fall in daytime prices as efficient
electricity plants set off-peak prices.
Bord Gáis says combined price
increases of these four commodities were magnified in euro terms, as both
sterling and the US dollar strengthened amid European sovereign debt concerns
and increasing market speculation about the future of the euro. The euro fell
from an early-month high versus the $USD of $1.42 to close out November at
$1.30, while against sterling, the euro weakened to a two-month low of £0.82GBP,
compared with £0.87GBP at the beginning of November.· Combined movements in the
prices of the four commodities of natural gas, coal, oil and electricity
resulted in an increase in the Energy Index of 8% on October’s figures. The
Energy Index now stands at 121.
Michael Kelleher, energy
analyst at Bord Gáis Energy said: “November saw some
considerable movement in key commodities, driven primarily by instability in the
Euro and a weather-influenced surge in demand for energy. Uncertainty in the
global economic outlook has resulted in a notable degree of caution among energy
traders. In the more immediate term, a severe winter could put additional
pressure of the price of commodities as supplies are strained.”