Energy prices recover on uncertain agreement

Oil, diesel and gas fell sharply in price after hopeful reports about the negotiations between the US and Iran over ending the war. Diesel is at its lowest point in thirteen weeks and oil reached its lowest level in five weeks yesterday. Prices are still much higher than before the war in Iran. Optimism also needs to be tempered. An agreement is still extremely uncertain and yesterday and today there were attacks back and forth. Oil and gas prices have therefore partly recovered again. Diesel now costs €164.85 per 100 litres (from 4,000 litres. LTO members price). That is the lowest price since 3 March, when diesel cost €153.96 per 100 litres. At the start of the year, however, the price was still around €130 per 100 litres. Oil has fallen below $100 per barrel. Yesterday oil closed at $96.14, the lowest point in five weeks. Optimism about the negotiations between the US and Iran was responsible for the price drop. Both parties say work is under way on a memorandum of understanding to end the war, after which negotiators would have sixty days to reach a final agreement. According to Tehran, however, an agreement is not yet on the table and Israel has so far not stopped the attacks on Lebanon, an Iranian demand. Furthermore, the US carried out attacks in southern Iran yesterday and Iran is threatening to attack US military bases in the region in response. As of the time of writing (Tuesday afternoon 26 May), the oil price has risen again by 3% today to $99.06. Compared with the recent peak of $112.10 per barrel on 18 May, that is still a significant decline. To put this in perspective: in January the oil price fluctuated between $60 and $70 per barrel. Besides oil being in short supply, tensions in the Middle East are also causing high war risk premiums for shipping through the Strait of Hormuz. That also affects transport costs for oil and oil products and in turn the final price. According to Lloyd's List, the number of ships from the shadow fleet in the region is increasing and 92 of the 513 fraudulent ships are now in the Middle East. Russia benefits Russia is benefiting from the market disruption. Since March, export volumes and demand for Russian oil have increased sharply, Lloyd's List reported last week in a webinar. The US has partially lifted sanctions on Russian oil and extended exemptions until mid June. The UK is meanwhile allowing imports of diesel and kerosene refined outside Russia from Russian oil. India and China remain the largest buyers of Russian crude oil, according to the market bureau. Gas price rises again The gas price also showed a decline on Monday compared with Friday. Gas fell 6.7% in price. Today, up to the time of writing, the loss has been partly made up again by an increase of 4% to €47.25 per MWh. Over the past week, the average day price on the Epex Spot fluctuated between €118.03 per MWh on 19 May and €66.40 per MWh on 24 May. Lots of solar energy It should come as no surprise that with the current bright weather, a lot of solar energy is being generated. Up to and including Monday, the expected solar energy production in the Netherlands is significantly higher than in the three-year average for this week. Wind power generation, on the other hand, is lagging behind, except tomorrow.