Analysis Energy
Electricity market increasingly extreme, small recovery oil
We are used to the fact that the electricity price fluctuates, but these weeks the price fluctuations were extreme. Prices on the oil market are on the cusp of a cautious recovery after last week's sharp decline. The White House is trying to limit the price increase, but is that having an effect?
We have seen regularly in recent months that the electricity market is a market of extremes. This week the difference is very extreme. On Sunday, August 8, the EPEX Spot stood at €8,54 per MWh. That is the lowest level since early May. A few days later, the price shot through €100 per MWh. Wednesday 11 August the price stood at €100,72 and on Thursday even €106,56 per MWh.
It has been over 10 years since spot prices approached these levels. Even on the electricity market, a factor of 12 between the lowest and highest price in a week is very large. Insiders attribute the large differences to the sharp increase in wind and solar energy. The production of those sources is difficult to control. Due to the holiday season, there is less demand for electricity, while last weekend there was quite a lot of wind and the sun was also shining reasonably. That provided a wide range. A few days later, the wind dropped and the market turned into a deficit.
Attention to the electricity grid
The concerns of the grid operators, among others, about the security of supply seem more than justified. There is attention for the storage of electricity, but not enough steps are being taken yet. And that while more windmills and solar panels are being added. For example, figures published last week by the RVO on the SDE subsidy show that at least 9 gigawatt peaks in solar panels will be added in the coming years.
The Dutch network is not designed for this. You can adapt, but it will cost time and money. Grid operator Liander therefore calls for an accelerated phasing out of the current netting scheme for small consumers with a connection of up to 3x80 amps. That money could be better used to boost home batteries. This means that the peak load can be absorbed and that solar installations do not have to switch off due to overloading of the grid.
Gentle recovery oil
The oil price is starting a cautious recovery. On Monday, August 9, a barrel of Brent crude was trading at $69,21. On Wednesday, that rose to $71,69, the highest point this week. On Friday (August 13), that fell slightly again to $71,16 a barrel.
The small spike on Wednesday was caused by the American White House. President Joe Biden intervened in the discussion about the production planning of the OPEC+ countries and called for a faster increase in production. This is to temper the rise in fuel prices and the associated inflation.
Not the desired effect
The market there reacted somewhat differently to what the White House probably expected. The US is not a member of OPEC+ and has limited influence over the cartel. The idea behind the call - a helping hand for OPEC members who are in favor of increasing production - did not come out well. The discussion about production quotas will take place anyway, the Americans are not needed for that. On the contrary, analysts and traders estimate that the American attempt could strengthen the ties in the cartel.
It is striking that the White House made an appeal to OPEC and not to the American oil companies. A clear signal for analysts that the fear of shortages in the oil market is not too bad.
The diesel price has remained largely stable this week. On Tuesday, August 10, the daily price reacted briefly to the low oil price of crude oil a day earlier. As a result, the price stood at €105,76 per 100 litres. The rest of the week the price hovered just above €107, today (Friday 13 August) €107,05 per 100 liters.
Jurphaas Lugtenburg
© DCA Market Intelligence. This market information is subject to copyright. It is not permitted to reproduce, distribute, disseminate or make the content available to third parties for compensation, in any form, without the express written permission of DCA Market Intelligence.
