Analysis Energy
Oil price stabilizes and falls below $70
The oil price is on the rise. The $70 barrier was in sight, but the market did not have enough momentum to break through this psychological barrier. Furthermore, the electricity market is still characterized by considerable fluctuations and entrepreneurs in the renewable energy sector hope for a rapid cabinet formation. According to them, uncertainty about government policy is slowing down the energy transition.
The electricity market remains a market of extremes. On Tuesday, May 4, the price dropped to €32,92 per MWh on the EPEX spot listing, mainly due to the strong wind. Today (Friday 7 May) the price has almost doubled to €70,20 per MWh. That doesn't seem to change for the next week. The weather forecasts show large temperature fluctuations and the sun forecast is very uncertain.
Role of coal not yet played out
The price for coal has risen sharply in the past week and is at its highest level in 3 years. This energy carrier is sucked in mainly by the high gas price. Despite government policies to reduce the use of coal, it still remains a relatively important factor in the energy market.
The CO2 emission rights have risen further in price this week. The submission period for allowances for 2020 has ended on 1 May, but that has not resulted in a decrease expected by many analysts. In fact, the price of €50 per tonne of CO2 has been broken this week.
Long cabinet formation creates uncertainty
No fewer than 88% of the entrepreneurs in the energy transition believe that the new cabinet must develop robust additional policy in order to be able to achieve the climate goals by 2030. This is apparent from research by the Dutch Association for Renewable Energy (NVDE). Long-term clarity is mentioned by many companies as a condition for investing and growing in sustainability. About half of the companies are in favor of an increase in the SDE++ subsidy.
There is also a lot of unrest in the sector about the slow progress of the cabinet formation. Almost 60% of the companies surveyed think that policy and investment plans for the energy transition will be delayed if there is no new cabinet before the summer. Important decisions still need to be made by the new cabinet in 2021 in order to achieve the 2030 climate targets. The question is whether those decisions can be taken in time due to the slow formation.
Oil price rise does not continue
The oil price is under some pressure again. On Tuesday, May 4, $70 a barrel came into view, but the price of Brent crude eventually stalled at $69,45 a barrel. Over the next few days, the price has fallen and today (Friday, May 7) Brent is trading at $68,17 a barrel. This means that the oil price fluctuates around the level that we also saw in mid-March.
US oil production is just 2% below its 5-year average, the Energy Information Administration (EIA) said in its status report. The stock is also about 2% below the 5-year average. The reports are therefore bullish according to analysts, but the report has not had that effect on the market.
Saudi Aramco lowers price for Asia
Saudi Aramco announced this week that it is cutting oil prices for the Asian market for June. The official statement from the Saudi oil company is that oil demand from India is expected to shrink due to the new corona outbreak in that country. Several analysts question whether this is the real reason. The OPEC+ countries want to increase oil production, while India is cutting oil imports from Saudi Arabia by a third before May. Indian refineries divert their oil to Guyana, Norway, Brazil and the US. The Saudi oil minister last month refused a request from India to import more oil. "Use the stock that you bought cheap months ago," said the minister. That unsolicited advice hasn't exactly gone down well in India.
Petrol breaks through 2014 price level
Diesel prices have risen this week. The week started on Monday with €102,49 per 100 liters. Yesterday that rose to €104,65 per 100 litres. That is the highest level in a year. A significant price increase, but not as high as for gasoline. It broke through the price level of 2014. In the meantime, the diesel price has dropped slightly again to €103,80 per 100 litres.
Jurphaas Lugtenburg
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