Night to Thursday, the oil price passed 100 dollars for the first time since 2014. At 10 o’clock on Thursday morning, it has increased by 6 percent from the day before and North Sea oil is traded for 105 dollars a barrel.
There is even greater growth for the gas price: it has increased by 50-60 percent in the last week, says power analyst Olav Johan Botnen in Volue Insight to NTB. It quickly has an impact on the Norwegian power market.
– Only from yesterday to today, I would guess that we are talking about 20-25 øre per KWT power price increase in southern Norway for the rest of 2022 – provided that the gas price increase lasts, Botnen says.
However, the price fluctuates very much on Thursday morning – during two to three hours of trading, the increase has been between 15 and 35 percent. At 10.30, prices are up 32 percent from Wednesday.
Invasion and wind stops increase
– Next week, there will be double the changes for both German and southern Norwegian power prices. The price of gas goes up, and the wind goes down. It will be a strong total effect for Germany, which can propagate quite a lot to southern Norway, says Botnen.
He estimates that the Germans must expect a 90 percent price increase next week. In southern Norway, the price of power for next week was to increase by 15 per cent, but that was before the last price increase for gas. Botnen now estimates a growth of 25 percent, up to a price of 145 øre per kWt next week.
Unresolved situation
At the start of the trading day on Thursday, there is hardly any trading in the market – the distance between the buyer and seller’s price suggestion is too great, says Botnen.
It is currently very unclear what the real gas price will be in the future. Botnen points out that nothing has happened “on the ground” yet – the gas supply to Europe is currently quite unchanged.
– It is only a risk premium that is building up now. There are no significant changes in the Russian gas flow to Europe this week, but it can of course change quickly, says Botnen.
Russia accounts for 40 percent of the gas and 25 percent of the oil that Europe imports. The bottom “dare not answer” what a halt to Russia’s energy supply in Europe will entail.
– It is a condition that has never occurred in modern times, so it is difficult to answer. There will probably be a panic reaction in the European gas and power markets if that should happen.
Very demanding to compensate for Russian gas
At the same time as the gas price is growing, the oil price has also risen to old heights.
– Of course it is difficult to say how high the oil price can go. If there are sanctions on oil and gas exports to Russia, it is not good to say where the price may land in periods, says analyst Tore Guldbrandsøy in Rystad Energy.
Russia exports more than double what Norway produces, about 4 million barrels a day. If Russian oil disappears, Guldbrandsøy points out that the OPEC countries can scale up production.
Russia produces about as much gas as Norway. A possible absence of Russian gas will be very difficult to compensate for, Guldbrandsøy believes – European gas stocks are already low.
– In the worst case, we have to use less energy, says Guldbrandsøy.
He believes, however, that it will take some time before the increased oil price has a similar effect on the pump price.
– One sees less effect on the price of petrol than on the price of oil. It has to do with taxes and duties, which are a large part of the price of petrol, but it will also be affected by how much oil is in the oil reserves in Europe.
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