Analysis Energy
Tight supply of power and high demand for oil
The energy market manages to maintain its upward trend. Positive economic outlook is pushing up the oil price. The weather is an important factor in the electricity market, which causes relatively high prices due to a lack of sun and wind. Grid operators also call the presented regional energy strategies feasible, provided that action is taken quickly.
The oil price is firmly in the saddle. On Monday, Brent crude was quoted at $74,62 a barrel. that rose to $75,94 a barrel during the week. Analysts say the price is holding up on optimism about economic recovery and the resulting growing demand for oil.
Disagreements at OPEC+
The market is eagerly awaiting the OPEC+ meeting today (Friday, July 2), after a one-day delay. The delay is due to doubts by the United Arab Emirates about a production increase of 2 million barrels per day in the second half of this year. The Emirates find their allocated production increase of 400.000 barrels per day from August to September too low and want a higher quota. They have therefore blocked the provisional agreement, causing the meeting to be postponed.
Diesel, like crude oil, has become more expensive in the past week. On Monday 28 June, the diesel price was €107,87 per 100 liters with a bulk purchase of at least 4.000 liters. That has gradually increased to €108,42 per 100 liters today (Friday 2 July).
Record fuel prices?
At the pump, the suggested retail price for Euro95 has broken the magical €2 per liter barrier. That seems strange. Crude oil has become significantly more expensive, but it is not on the $100 and higher prices that we regularly saw in 2008 and from 2011 to 2015. However, a good comparison between the recommended prices is more complex. Gas stations have significantly increased their discount percentages on the recommended prices for diesel and petrol in recent years.
In practice, it turns out that only the pumps along the highway offer very little discount on the recommended retail price. It may sound crazy, but there the sale of fuel is secondary to the income from the stores at the stations where the turnover is mainly made. Fuel prices have certainly risen, but the records reported call for some nuance, especially for bulk diesel deliveries.
Lack of sun and wind
Electricity prices have been on the rise over the past week. As is now customary, Sunday 27 June still dropped to €63,83 per MWh. That rose to prices around €90 per MWh for the rest of the week. Today (Friday 2 July) the EPEX Spot quotation is even at €96,02 per MWh hour. The high prices are partly caused by disappointing yields from solar panels and wind turbines. But maintenance work on power stations in the Netherlands also plays a role. Last week, the Netherlands itself was the largest importer of electricity in Northwestern Europe.
Analysts do not expect any changes in the electricity market for the coming week. According to the weather reports, stable summer weather or an increasing wind is not possible. The supply of electricity from these sources therefore remains limited. The maintenance of some power stations will be completed next week if all goes well, but some important cables with which cheap foreign electricity is imported will be removed for maintenance.
Energy transition feasible if we act now
According to the grid operators, the regional energy strategies (RES) presented yesterday (Thursday, 1 July) have a major impact on the infrastructure. The agreed climate target is that 35 terawatt hours of sustainable energy will be generated on land. It is possible to connect this expansion of solar and wind energy to the electricity grid in 2030, but then the plans must be worked out in concrete terms as soon as possible, grid operator TenneT said in a statement.
The grid operator does warn that major changes to the grid will cause nuisance. "Increasing demand for electricity and a lack of technically trained personnel requires sharp choices and priorities and an open view of what is still possible," according to TenneT. Better coordination between supply and demand on the electricity grid and making storage or conversion profitable would help in this regard. According to the grid operators, a larger expansion of solar and wind energy than what is currently laid down in the RES does not seem realistic.
Jurphaas Lugtenburg
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