Rise in oil prices offsets big drop in natural gas prices - energy index

Monday 07 July 2014 08.39
Oil traders very alarmed by recent events in Iraq
Oil traders very alarmed by recent events in Iraq

Steep rises in the price of wholesale oil offset declines in wholesale natural gas prices in June, the latest energy index from Bord Gáis shows.

The Bord Gáis energy index stood at 133 in June, unchanged from the same time last year.

Bord Gáis said that Brent crude hit a yearly high in June, as the tensions in Iraq worried investors and raised concerns about the availability of global oil supplies to meet rising demand.

However, these price rises were offset by a 12% drop in the average UK natural gas price.

The June index shows that its oil element rose by 2% as the market became very alarmed by the emergence of the ISIL in Iraq.

Bord Gáis said the recent events in Iraq again demonstrate the deep sectarian divide that exists in a region that supplies vast quantities to oil to the world. 

It said that question marks over Iraq's ability to supply oil, along with worries in Libya, Iran, Syria, South Sudan, Yemen and Nigeria could expose the world to oil price spikes if supply disruptions occur over the next few months.

The natural gas element of the index shows that prices fell by 12% last month due to weak demand and bumper supplies. Bord Gáis noted that despite an explosion in a key gas transit pipeline in Ukraine and the decision by Moscow to cut off supplies to Ukraine over a long-running payment dispute, wholesale gas prices  in the UK continued to weaken as Russian gas supplies to Europe remain uninterrupted.

The coal element of the index declined by 2% due to weak demand in Europe, while the monthly average Irish wholesale electricity price fell by 4% due to weaker wholesale gas prices. Gas powered generation dominates the generation mix of electricity in the island of Ireland, it noted.