Russian invasion may contribute to strong growth in electricity prices in Southern Norway next week

Electricity - power linesPhoto: Håkon Mosvold Larsen / NTB
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The attack on Ukraine is driving up gas prices. Together with less wind, it could lead to the power price in Southern Norway increasing by 25% next week, a power analyst believes.

Night to Thursday, the oil price passed USD 100 for the first time since 2014. At 10 o’clock on Thursday morning, it had increased by 6% from the day before, and North Sea oil was traded for USD 105 a barrel.

The growth of gas prices is even bigger: the price has increased by 50-60% in the last week, power analyst Olav Johan Botnen in Volue Insight told NTB. It could quickly have 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 said.

However, the price fluctuated a lot on Thursday morning – during two to three hours of trading, the increase has been between 15 and 35%. At 10:30 AM, prices were up 32% from Wednesday.

Invasion and wind forecast fuel increase

Botnen estimates that Germans should expect a 90% price increase next week. In Southern Norway, the price of power for next week was to increase by 15%, but that was before the last price increase for gas. 

Botnen now estimates a growth of 25% next week.

Unclear situation

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 that can, of course, change quickly,” Botnen added.

Russia’s gas and oil account for 40% of the gas and 25% of the oil that Europe imports. Botnen “does not dare to answer” what a halt of Russia’s energy supply to Europe would entail.

“It is a situation 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 happens.”

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 price levels.

“Of course, it is difficult to say how high the oil price can go,” analyst Tore Guldbrandsøy in Rystad Energy noted.

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 could 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 will have to use less energy,” Guldbrandsøy said.

Source: © NTB Scanpix / #Norway Today / #NorwayTodayNews

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