After an unprecedented crash in the oil and gas price due to the corona crisis this spring, the energy market remained stable throughout the summer. That is now a thing of the past, the market for CO2 rights is the only stable factor.
After the oil price fluctuated around $45 a barrel for months, the trend is now reversing. For the first time since July, the price of a barrel of crude oil fell below $37 this week (week 40). For the time being, agricultural diesel does not cost much more than €0,85, which is 5 cents less than the €0,90 that had to be paid for a long time this summer. Excise duties determine the bottom of the price of agricultural diesel.
OPEC agreements
The falling oil price seems to have deeper causes than usual speculation. It is not known exactly why, how long it will take and how deep the valley will be. The fact that Saudi Arabia has lowered its sales prices for October certainly plays a role.
The fear that the number of corona infections will increase again is probably the most important explanation for the price decline. The resurgence of the virus could thwart global economic recovery and reduce fuel demand. The oil price was able to recover in recent months after the unprecedented fall this spring, thanks in part to agreements between oil-producing countries (OPEC+) on production cuts.
Due to the economic crisis, many countries are looking for additional sources of income, which means there is more supply of oil. It therefore seems that some countries are not fully adhering to the agreements made, analysts suspect. This will probably be discussed in OPEC context next week.
Gas price past peak
The falling oil price is also putting pressure on the gas price. It is normal for the gas price to move along with the oil price, but this has not been the case in recent weeks. The large gas reserves created by the corona crisis have disappeared and the production of renewable energy fluctuated sharply in August. As a result, gas had to be used as a buffer. The approaching winter, in which the demand for gas is increasing, also played a role. Week after week, the gas price climbed out of the deep trough, but now the falling oil price is pulling the gas price along.
Renewable energy
Renewable energy production from solar panels and wind turbines has been relatively low so far in September, according to figures from energieopwek.nl† With the sunny outlook at the moment, it is obvious that supply will rise again in the coming week, although the rapidly decreasing day length makes it impossible to reach the record figures of this spring again. In any case, 2020 is a record year for renewable energy. 20-25% of the total electricity requirement in the Netherlands is now supplied by wind turbines and solar panels.
The fast-growing production of sustainable energy goes hand in hand with the shutting of the Groningen gas tap. The Dutch gas market has completely changed in two years. While the Netherlands was a leading exporter of natural gas for many years thanks to the Groningen gas fields, imports now have to be made. Norway in particular supplies natural gas. Natural gas is still extracted in the Netherlands in the North Sea and in places other than the province of Groningen, but this is in no relation to the production that the Groningen gas fields achieved until recently.
CO2 rights beacon in an uncertain market
The market for CO2 rights is currently the only stable factor in the energy market. The price of CO2 rights has been rising for weeks, after this market also collapsed due to the corona crisis. Even now that uncertainty has hit the energy market and the stability of the summer dormancy has disappeared, the price of the rights continues to rise. The question is not whether this increase will continue, given the global climate agenda and European Union policy, but how expensive the rights will become.
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