The new reality is already starting to get used to the energy market. Electricity is expensive, but you can still see a clear bandwidth between which the price moves. The oil market, on the other hand, isn't really heading in the right direction. One week windfalls push the price up, the next week setbacks undo that. Will that change?
The electricity price remained within the bandwidth as we have seen more often in recent weeks. On Sunday, November 7, the EPEX Spot quotation was at the lowest point of the week at €102,44 per MWh. A day later, the price almost doubled to €204,39 per MWh. In the days that followed, the price dropped slightly again, reaching today (Friday, November 12) at €161,92 per MWh.
Fossil fuel is expensive
The spike in the price last Monday can be explained by a low supply of electricity from wind on that day. It was quite windy, especially towards the evening. The relatively high gas and coal prices (approximately double compared to the same period last year for gas and triple for coal) are also clearly visible in the electricity price. At times when little green energy is available, daily and hourly prices are significantly higher, a sign that the cost of generating electricity in traditional power stations has risen considerably.
There appear to be no major changes in electricity prices for the coming week. Gas prices, which in turn affect the electricity price, are under some pressure due to the start of additional deliveries from Russia. But that effect could quickly be offset by cooler weather forecast for the coming days.
Changing confidence
Confidence in the oil market slowly returned. On Tuesday, November 9, Brent crude oil even passed $85 per barrel and closed at $85,21. Publication of the inflation rate in the US, the highest level since 6,1 at 1990%, quickly dashed that optimism and today Brent stands at $82,09 per barrel.
It is difficult to estimate which direction the oil market will move in. Some analysts focus on the demand side and look at inflation. This has been relatively high in the EU and the US for a few months in a row. This group therefore believes that there is no exception and that everything will quickly return to normal, but that the underlying problems are more structural in nature and will persist for a longer period. A longer period of high inflation has negative consequences for economic growth and at a certain point requires central banks to intervene, which is not always seen as positive by the market.
The other group of analysts looks at inventory and production figures. U.S. crude and distillate inventories in particular have dwindled in recent months and see no signs of ramping up production anytime soon. Despite the resumption of negotiations on the nuclear program, the chance that Iranian oil will soon come back onto the world market en masse does not seem great. OPEC+ stood its ground last week and did not deviate from established production quotas, despite President Biden's urging of the cartel to increase production. And the US's own oil companies also do not appear to have any intention of significantly increasing production.
Meanwhile, the daily prices of diesel pay little attention to what happens on the oil market. On Wednesday, November 10, the diesel price again reached a historically high price at €124,09 per 100 liters. The price has dropped slightly again today (Friday, November 12), but at €122,59 per 100 liters it still remains at a level that we have rarely or never seen.
No support for fossil energy
The Netherlands will stop providing new support for fossil exports. After much deliberation, the Netherlands decided last week to join the coalition of countries that want to stop government support for fossil energy in the short term. To this end, the Netherlands has signed a Glasgow declaration, State Secretary Vijlbrief of Finance informed the House of Representatives.
Various environmental organizations reacted happily in the media. However, some analysts and economists are less optimistic. When energy prices explode, as we have seen recently, market players would like to fall back on quickly deployable resources such as fossil fuels. By stopping investing now you close the door on that option. And as long as there are no good alternatives, you are taking a significant risk.