Energy - commodity conditions
During 2020, the oil market experienced considerable volatility, with prices collapsing in the 1st Quarter, largely due to the impact of the pandemic, before partially reversing the losses in the 2nd Half of the year, thanks to the gradual reopening of the world’s major economies and sharp production cuts by the OPEC countries. At the beginning of December, Brent and WTI prices reached their highest levels since March, thanks above all to expectations for a recovery in demand fueled by the arrival of vaccines and the agreement reached in the last OPEC meeting to increase production starting from January 2021, containing the fall in oil prices to about 33% compared with levels in 2019.
The gas market was also buffeted by strong volatility during 2020, with the 1st Half of the year characterized by a contraction of almost 50% in prices on all the main European hubs compared with 2019. A combination of record levels of stocks, resilient supply and mild weather put pressure on prices. The restrictions on mobility imposed to counter the pandemic and the pressure of a market already experiencing clear oversupply also caused European gas demand to contract by 5%.
In the 2nd Half of the year, demand for gas recovered thanks to low coal and nuclear generation in Europe, reduced flows from Russia, the decline in LNG imports and the recovery of Asian demand, as well as an increase in demand for gas for heating, which returned prices to a level in line with the averages for 2019, even though they were still well below the annual average levels registered in 2017 and 2018.
The price of CO₂ on the ETS displayed excellent resilience, remaining stable at around €25/ton and rapidly absorbing the initial shock experienced in March and May, months in which the first wave of COVID-19 cases triggered a temporary decline to around €15/20/ton.
Recent statements by the European Commission about the central role of the ETS in achieving decarbonization and climate neutrality goals have supported the market, leaving prices on a gradually rising path towards long-term equilibrium.
Electricity and natural gas markets
DEVELOPMENTS IN ELECTRICITY DEMAND (1)(2)
(1) Gross of grid losses.
(2) The figures are the best estimate available at the publication date and could be revised by TSOs in the coming months.
Source: Enel based on TSO figures.
The past year was particularly bad for electricity consumption due to the onset of the COVID-19 pandemic in March, with Belgium, the United Kingdom, Italy, Spain and France the most severely affected countries, experiencing declines in demand due to the emergency of 5%-6% compared with 2019.
Italy and Spain saw electricity demand drop by 5.3% and 5.2% respectively. Examining developments at the sector level, in Spain, the decline in energy demand has returned to pre-COVID-19 levels in the industrial sector, while demand in services is still down.
In Latin America, electricity demand declined significantly in Peru (-7.5%), reflecting the prolonged closure of mining activities, and in Colombia (-2.8%), mainly attributable to the closure of large and medium-sized firms. The decline in electricity consumption was smaller in Brazil, thanks to more localized restrictive measures that were not extended to the national level, and in Argentina, with falls of about 1.2% and 0.8% respectively. Electricity demand in Chile was more resilient, recording an increase, albeit a small one, of 1.3%.
|Average baseload price 2020 (€/MWh)||Change in average baseload price 2020-2019||Average peakload price 2020 (€/MWh)||Change in average peakload price 2020-2019|
PRICE DEVELOPMENTS IN THE MAIN MARKETS(1)
|Final market (residential)(2)|
|Final market (industrial)(3)|
(1) The figures are the best estimate available at the publication date and could be revised by TSOs in the coming months.
(2) Annual price net of taxes - annual consumption of between 2,500 kWh and 5,000 kWh.
(3) Annual price net of taxes - annual consumption of between 70,000 MWh and 150,000 MWh.
Natural gas markets
NATURAL GAS DEMAND
|Billions of m3|
The COVID-19 crisis and an exceptionally mild winter in the northern hemisphere caused global gas demand to suffer its largest year-on-year decline in history (-4% according to the latest estimates of the IEA).
In Europe, gas demand decreased by an average of 5% in 2020, with most of the decline coming in the 2nd Quarter. The countries most affected included Spain (-8.8%), with a decline mainly attributable to the thermal generation (-20%) and residential (-12%) sectors, France, the United Kingdom and finally Germany.
NATURAL GAS DEMAND IN ITALY
|Billions of m3|
(1) Includes other consumption and losses.
Source: Enel based on data from the Ministry for Economic Development and Snam Rete Gas.
In Italy, demand contracted by 4.1% compared with 2019, with an especially steep decline in thermal generation (-3.8%) and industry (-7.1%), and a less marked decrease in the distribution grid segment (-3.1%), thanks to an increase in consumption in the 4th Quarter (+14% year on year), due to demand for heating.