Analysis Energy
Cold waves bring tension to the energy market
Daily electricity prices have fallen sharply after last week's peak. The mild weather here ensures peace in the market. The oil market is currently under the spell of the cold weather in the US. The cold spell, first in Europe and now in America, makes it clear that there are still major steps to be taken before we can switch to sustainable energy.
Electricity prices have fallen sharply this week. Last week the EPEX Spot market peaked at just under €80 per MW/h. This was partly due to the cold that increased demand for energy and partly because wind and solar energy lagged behind in production. The weather is much milder this week. Prices are considerably lower and fluctuate around €45 to €50 per MW/h. The weather forecasts indicate even milder weather for the next few days.
Sustainable energy versus security of supply
In recent weeks it has become clear that we still have a long way to go in the energy transition. In Germany – the frontrunner in sustainable energy generation in Europe – snow and a calm wind have caused tension on the energy market. Windmills did not turn and solar panels were covered with a thick layer of snow. Due to the closure of coal and nuclear power plants, there was insufficient (over)capacity to meet the energy demand. Gray electricity had to be imported from neighboring countries to guarantee security of supply.
A similar phenomenon occurred in Texas this week. Natural gas is the main source of energy there and accounts for approximately 50% of the energy. About a quarter of the electricity is generated by wind turbines. An extreme cold wave prevented the mills from turning due to ice build-up on the blades. The gas-fired power stations could not switch on quickly enough, leaving parts of the Texas without power.
Oil market hit by cold snap in Texas
The cold spell in the US is disrupting the oil market. Texas production fell by 4 million barrels per day. Normal production is 4,6 million barrels per day. That is about 40% of the production in the US. Not only is much less oil being pumped up, the refineries around the Mexican Gulf are also largely shut down. Production is expected to resume next week.
OPEC+ members will meet again in two weeks. Various countries are making their views public in anticipation of this. It thus becomes clear that Saudi Arabia is likely to stick to its self-imposed production restrictions until April. Russia has been dealing with extremely cold weather in recent weeks. The country has therefore pumped up less oil than there is room for within the quota. Analysts expect that as the weather softens in March, Russia will want to catch up with this production. Brent oil rose this week to $64,80 a barrel on Wednesday, February 17. Meanwhile, the price has dropped again to $63,21 today (Friday, February 16).
At the moment, the diesel price is fairly similar to the oil price. The daily price for diesel is currently €101,95 per 100 liters. This meant that the diesel price has risen this week by approximately €1,50 per 100 litres.
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.
