Energy Market Risk Analysis – early December 2011

April Annual slumps to 12-month low

April ’12 Annual UK power, the key benchmark price for many end-users, has slumped beneath £49/MWh for the first time since last November. The Annual, which reached a high of almost £61/MWh in April after the Fukushima disaster and launch of UK carbon tax plans, has been trailing steadily lower since then − but it has seen an accelerated drop in recent days, shedding nearly 5% in value over the last fortnight.

Q1 2012 gas prices down 10%, Day-ahead down by 8%, and Annuals down 5% – it has been a weak fortnight across all periods, as low demand and a healthy supply outlook have weighed on sentiment.

Prices across the remainder of this winter have again taken the brunt of the down-talk, as revised weather forecasts – now indicating a milder than normal winter – have been published. Demand at the end of November was just half of what it was a year earlier – the sharp difference largely explained by the fact this November has been the second warmest on record, while at this time last year temperatures were hitting record seasonal lows.

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Energy price shift between 17 November 2011 and 01 December 2011

Elec: -5.62%

Gas: -4.24%

Coal: -1.34%

Oil: -3.14%
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