Analysis Energy
Electricity continues to be expensive and OPEC causes unrest
Electricity continues to be expensive. The supply is still limited, partly due to disappointing revenues from solar and wind energy. The oil price has fallen slightly this week after disagreements between OPEC+ members. And the Netherlands is investigating the opportunities for nuclear energy.
Electricity prices remain remarkably high. A combination of high gas and coal prices and a limited supply of solar and wind energy is responsible for this relatively high price. The EPEX spot listing did not even have the usual Sunday dip in the price last week. Only on Tuesday, July 6, the price dropped below €80 with €77,66 per MWh due to stormy weather that provided an ample supply of wind energy. On Thursday 8 July, the quotation was €96,04 per MWh.
For the coming week, analysts predict electricity prices to be around this week's level. Sunny summer weather is not expected and the wind does not pick up either. As a result, the supply of sustainable electricity remains limited. In addition, TenneT is still working on maintenance of the network, which, as in recent weeks, means that the supply is somewhat more limited.
Interest in nuclear energy
Dilan Yeşilgöz, State Secretary for Economic Affairs and Climate, will look at the role nuclear energy can play in the Dutch energy market, in addition to other sustainable sources such as solar and wind energy. The reason for this is a report by KPMG, which shows that market parties are prepared to invest in nuclear energy. Provided that the government pursues a stable policy and offers guarantees, so that the financing risks are acceptable to them and there is sufficient social support.
The State Secretary is having a scenario study drawn up for 2030 to 2050 and beyond. "To achieve our climate goals, we have to pull out all the stops, including nuclear energy if it is cost-effective and safe," Yeşilgöz said in the statement. "That is why I also want to look at how we can maintain and strengthen the nuclear knowledge that we have in the Netherlands. We must keep all options open."
The most likely location for a new nuclear power plant seems to be the province of Zeeland. In addition to a new nuclear power plant, various companies involved are advocating to keep the existing nuclear power plant in Borssele open for longer. The power station is economically viable and nuclear knowledge is thus preserved.
Uncertainty from OPEC+
The oil price is taking a step back this week. On Monday, the price for Brent crude oil closed at $77,10 a barrel. On Wednesday, that dropped to $73,32 a barrel, before climbing back up again to $74,63 a barrel.
The oil market is gripped by uncertainty, according to analysts, caused by disagreements within OPEC+. Where members could not agree a year ago on the cartel's production restrictions - to limit the sharp fall in the oil price caused by corona - they are now unable to figure out how to increase production again to curb the price increase. It has so far failed to break the stalemate between Saudi Arabia and the United Arab Emirates over who gets to pump how much extra oil. In doing so, the 2 large members not only damage OPEC+'s image, but also the role as guardian of the market that the cartel likes to ascribe to itself.
Two currents
Analysts are also divided on how to interpret OPEC+ signals. In the short term, the squabbling within OPEC+ has fueled bullish sentiment in the oil market. In the longer term, opinions differ more. Limited supply and increased demand for oil due to a recovering economy are making some traders and investors optimistic. Some even dare to say that within a year the oil will hit $100 a barrel again.
But there are also other sounds. Now the OPEC+ members are still neatly adhering to the imposed production quotas. If the countries set their own course, this could lead to a price war. An extreme price drop as in April 2020 is not obvious. But a drop in oil prices towards $50 to $60 a barrel, around the cost of several countries, is certainly not unrealistic, according to a group of analysts.
The diesel price peaked on Tuesday at €109,03 per 100 liters. That is the highest price in more than a year and a half. The price then dropped to €107,01 yesterday (Thurs, July 8). Today the price has risen slightly again to €107,43 per 100 litres.
Jurphaas Lugtenburg
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