The gas and electricity markets start the new year at a relatively low level. In addition to low consumption, the weather is putting pressure on the energy markets. Due to the weak economic expectations for 2024, gas prices are expected to remain low in the near future.
According to the last available quote on December 29, the gas price was at its lowest point since September 6. The price of gas at that time was €32,35. At the time of writing (Tuesday, January 2), the gas price was at approximately the same level.
This means that the price fell by 25,6% in December. Mild weather is an important cause of lower gas consumption. During the holidays, daytime temperatures were regularly above 10 degrees. This is well above the long-term average with the maximum temperatures of the days at 6,7 degrees. Since December 15, even night temperatures have not fallen below this level. Despite a cold start to the month, the average temperature of 6,88 degrees even exceeded the long-term average maximum temperature. Add to this a low industrial demand and you end up with a much lower gas demand than average.
In addition, the lower expected demand puts pressure on the gas price. The mild weather is expected to continue into early 2024. In addition, economic expectations for 2024 are far from optimistic. A recent report from investment bank J.P. Morgan exemplifies expectations. The bank's expectation is that the economy will remain reasonably balanced, with a slight decline or increase as an outcome. J.P. Morgan expects that the interest rate policies of Western governments will take hold of the economy next year. As a result, consumer spending will decline in 2023. As a result, both industrial activities and expenditure within the service sector are declining, J.P. writes. Morgan. According to analysts, the effects of the negative sentiment are already having an effect on the gas market.
As a result of the low consumption, the gas reserves remain well filled. While gas reserves decreased by about 4 to 5 percentage points per week, only 1 percentage point of gas was extracted last week. On January 1, Dutch gas reserves were 82% full. This is not only a new record, the filling level is also 5% above the targets of the Dutch Gas Union. A fairly high fill rate, although the fill rate is below the European Union average of 87%. The crucial German filling rate was even at 1% on December 90,8.
Electricity under the spell of holidays
The electricity price remained under the spell of the holidays this week. On Wednesday, December 27, the electricity price reached its highest point of the week, at €63,96. The price was below €50 for the rest of the day. On Sunday, December 31, the electricity price reached the lowest point of the week. On New Year's Day the price fell to €14,86.
The fact that many holidays are being celebrated did not go unnoticed on the electricity market. The low base price is the direct result of weak industrial demand. This should not be surprising, because electricity cannot be stored that easily, the price responds more strongly to changes in demand than the gas price.
In addition, the weather also resulted in a lower electricity price. The mild autumnal weather is not only leaving its mark on the electricity market due to low gas prices. Significant revenues from solar and especially wind energy also reduce electricity demand. In total, 59,2% of all electricity was generated virtually free. Solar energy yields accounted for a total of 3,4% of all Dutch energy consumption. The strong wind in particular provided a lot of free electricity. Wind turbines generated no less than 55,8% of Dutch electricity.