Analysis Energy
Energy remains remarkably good at the price
News from OPEC countries has pushed the oil price down slightly. The quarrel has been settled and for now the ranks are closed again within the cartel. The electricity market remains stable, with high prices. Does the combination of summer weather and lower demand due to the holidays result in a lower electricity price?
The price for oil has fallen. Last Monday (July 12), the price was $75,20 for one barrel of Brent crude, only to rise one day later to $76,44 a barrel. After news of a preliminary compromise with OPEC countries, oil prices fell from Wednesday. On Friday (July 16), the price came in at $73,59 per barrel.
According to a group of analysts, the volatile oil price is mainly due to the fact that the mood in the market is largely determined by the reports about economic growth and the (expected) increasing demand. As a result, the price has risen sharply in the last three quarters, while production has only been adjusted very slightly.
Slower recovery?
In the spring in particular, it looked as though oil demand would pick up rapidly and reach pre-corona levels in the second half of the year. But indicators are now pointing to a slower recovery in the economy. In the United States, for example, the stock of petrol and diesel is increasing slightly (a sign that there is less travel) and parts of Europe (such as the Netherlands) are turning red on the corona map, often resulting in extra measures.
For the oil market, we cannot ignore the soap opera that takes place at OPEC+. The dispute between Saudi Arabia and the United Arab Emirates about who gets how much quota and how the reference should be set has been settled for the time being. A group of analysts already expected that other members would not be left behind and dare to make more demands. That is happening now. Iraq has announced that it wants a larger quota. The agreements have been made for the coming months, but certainly in the longer term, the simmering disagreement can still cause problems within the cartel.
The diesel price shows little sign of the calming crude oil market. Diesel continues to be expensive, with a price of around €109 per 100 liters last week. According to the various analysts, prices will not fall that quickly. Confidence in economic recovery is too great for that.
Expensive power
The electricity price has remained stable high last week. On Sunday 11 July, the EPEX Spot listing dropped to €77,74 per MWh. On Tuesday, July 13, the quote peaked at €94,92 per MWh, before hovering around €85 per MWh for the rest of the week.
The outlook for this week is uncertain. The summer holidays have started in the North and Central regions, which means that the demand for electricity generally decreases somewhat. Good weather is also forecast for the solar panels. From this point of view, a price drop would be logical. On the other hand, work is still being done on the electricity grid, which means that the import of cheap electricity from Scandinavia is less easy than usual, especially at night.
Renewable energy generation is growing, but not fast enough
Global electricity demand is starting to grow again, according to the International Energy Agency (IEC). After a 1% drop in electricity demand in 2020, the IEA forecasts a 2021% growth for 5 and 4% for 2022. The growth is mainly due to Asia.
The IEA sees that the production of sustainably produced electricity is growing rapidly. It is just not enough to keep up with the increasing demand. Only half of the predicted growth will come from renewable sources. Fossil fuels remain necessary for the other half. It is striking that the role of coal-fired power stations is far from over. This year, the IEA predicts that 5% more electricity will be generated by coal-fired power stations and that this will grow by 2022% in 3. Coal remains a popular fuel, especially in Asia.
Jurphaas Lugtenburg
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