Political uncertainties have caused nervousness in the energy market
The central hedging policy of DB Group aims to minimize energy price fluctuations. Our activities are therefore not exposed to the full impact of changes in market prices, at least not in the short term.
Changing trends in the oil market
Brent crude (USD/bbl)
Source: Thomson Reuters
- In the first half of the year, output dropped further than the reductions set by the OPEC+ Group (OPEC countries, Russia and others), primarily as a result of the unforeseen disruptions in Venezuela. This led to a supply shortage on the oil market. Faced with rising prices, the OPEC+ Group decided to increase output volumes again.
- In the second half of the year, the possible impacts of the US sanctions on Iran came more and more clearly into focus. Although oil production in the USA reached new peaks, further increases were delayed by a lack of transport capacity. At the same time, the positive economic development led to robust demand, especially from Asia. The concerns regarding supply constraints resulting from this led to the oil market growing significantly from the middle of August 2018. At the beginning of October 2018, the price of Brent reached an annual high.
- In November 2018, the USA became the world’s largest oil-producing country. The resulting excess supply following softening of sanctions and new concerns regarding global economic development led to a prolonged downward trend in the oil market, causing the price of Brent to drop at the end of the year. Not even the decision by the OPEC+ Group to reduce output from 2019 was able to stabilize the market.
- Speculative investors may also have driven the price development. Bets on price increases were withdrawn, causing the price to fall even further.
Electricity prices are developing in parallel with the coal and CO₂ market
BASE LOAD POWER (FOLLOWING YEAR) (€MWH)
EMISSIONS CERTIFICATES (€/T CO2)
Source: Thomson Reuters
- The German electricity spot market is becoming increasingly weather-dependent. The fluctuation in production from renewable energies caused significant price fluctuations due to limited predictability. High temperatures and water shortages led to a further price increase in summer. High primary energy prices also acted to drive prices.
- There was a dip in price of the coal market until the end of the first quarter as a result of temporary import restrictions in China. Supply difficulties and persistently high demand in Asia drove prices up again quickly. Amongst other reasons, high natural gas prices from September 2018 led to price increases on the northwestern European coal market to over USD 100/t.
- The entry into force of the market stability reserve from 2019, which withdrew nearly a quarter of surplus certificates from the CO₂ market, caused a supply shortage. As soon as August 2018, the auction volume was reduced. In addition, there was speculation on the market as a result of discussions of a minimum price. Overall, the average price was significantly above the level of the previous year.