The energy industry

Energy - commodity conditions

Volatility returned to the oil market last year. Observing developments in the price of Brent, we find alternating upward and downward price movements during 2019, with a peak above $71 a barrel in April, before  falling below $60 a barrel in late summer.
Despite the numerous events exerting downward pressure on the global oil supply (the sanctions imposed by the Trump administration on Iranian exports, the deterioration in  the crisis in Venezuela and the attacks on infrastructure in Saudi Arabia), prices were lower than at the beginning of the year, indicating a structural weakness in global demand.

The average API2 price of coal in 2019 fell by 34% compared with 2018. This trend is attributable to two main factors: 1) the drop in global demand and 2) supply cuts that were insufficient to rebalance the fundamentals. The rapid drop in coal demand in Europe (with a decline of about 20% in imports compared with a year earlier) was due both to a number of closures of capacity and a replacement effect between coal and gas due to the greater cost competitiveness of combined-cycle plants. On the supply side, Indonesia maintained its position as the main exporter (a year-on-year increase of 40 million metric tons), followed by Russia and Australia, while exports from Colombia and the United States decreased due to the decline in demand from Europe.

During the past year, the weakening of Asian demand and new liquefaction capacity entering the market led to a surplus of LNG, which helped divert gas flows to Europe, first driving gas stocks to record levels and then causing a sharp drop in gas prices at all major European hubs. The average TTF gas price, for example, was €13.6/MWh, down 40% compared with a year earlier.

  

2019

2018

Change

Brent

$/bbl

64

72

-11.1%

API2

$/t

61

92

-33.7%

TTF

€/MWh

14

23

-39.1%

CO2

€/t

25

16

56.3%

After a 2018 characterized by constant growth, 2019 was instead afflicted by considerable volatility, which first saw the price of CO2 allowances fall below €20/t in February and then rise to €30/t in July. The  combination of mild temperatures, uncertainty over Brexit negotiations and concerns about possible risks associated with global macroeconomic growth strongly impacted market developments.
The sharp decrease in gas prices combined with the rise in the price of CO2 has helped drive changes in the generation mix in some European countries, encouraging gas-fired generation even in countries like Spain, where coal has    historically represented the marginal generation technology.

Electricity and natural gas markets

Electricity demand

Developments in electricity demand (1)

GWh

   
 

2019

2018

Change

Italy

319,597

321,910

-0.7%

Spain

248,876

253,495

-1.8%

Romania

61,699

62,044

-0.6%

Russia (2)

801,908

805,916

-0.5%

Argentina

133,323

137,262

-2.9%

Brazil

594,368

583,025

1.9%

Chile

77,064

76,175

1.2%

Colombia

71,181

69,176

2.9%

Peru

53,483

50,836

5.2%


(1)Gross of grid losses.
(2)Europe/Urals.
Source: Enel based on TSO figures.

In 2019, electricity demand trended downwards: in Italy, demand contracted by 0.7% compared with 2018, while Spain registered an even larger decline of 1.8%, reflecting weather developments.
Among the Latin American countries, electricity demand decreased sharply (-3%) in Argentina due to recession in the country, while all other countries in which Enel has a presence posted increases in electricity demand: Brazil  +1.9%, Chile +1.2% and Colombia +2.9%.

Electricity prices

Electricity prices

 

Average baseload price 2019 (€/MWh)

Change in average baseload price

2019-2018

Average peakload price 2019 (€/MWh)

Change in average peakload price

2019-2018

Italy

52.3

-14.6%

58.4

-14.2%

Spain

47.5

-17.1%

51.2

-16.8%


Price developments in the main markets

Eurocents/kWh

    
  

2019

2018

Change

Final market (residential)(1)

   

Italy

 

0.2301

0.2067

11.3%

France

 

0.1765

0.1754

0.6%

Romania

 

0.1358

0.1333

1.9%

Spain

 

0.2403

0.2383

0.8%

Final market (industrial)(2)

Italy

0.10660.075541.2%

France

0.07040.06862.6%

Romania

0.09850.079424.1%

Spain

0.09430.08807.2%

(1)Annual price net of taxes - annual consumption of between 2,500 kWh and 5,000 kWh.
(2)Annual price net of taxes - annual consumption of between 70,000 MWh and 150,000 MWh.
Source: Eurostat.

Natural gas markets

Natural gas demand

Millions of m3

    
 

2019

2018

Change 

Italy

72,947

71,514

1,433

2.0%

Spain

34,215

30,062

4,153

13.8%

Last year saw demand for natural gas rise in Italy (+2.0%), while demand jumped sharply in Spain (+13.8%), mainly driven by electricity generation.

Gas demand in Italy

Millions of m3

 
 

2019

2018

Change

Distribution grids

31,650

32,355

- 705

-2.2%

Industry

14,002

14,266

- 264

-1.9%

Thermal generation

25,775

23,361

2,414

10.3%

Other (1)

1,520

1,532

- 12

-0.8%

Total

72,947

71,514

1,433

2.0%

(1)Includes other consumption and losses.
Source: Enel based on data from the Ministry for Economic Development and Snam Rete Gas.

Observing the gas demand by sector, we see that the increase in Italy in 2019 is due exclusively to the thermal generation sector, which registered an increase of over ten per cent thanks to the steep decline in the VTP price, which made combined-cycle generation especially competitive.