Energy Market Risk Analysis – early April 2012

March ends on an uptick

April Annual ’12 went off the board on a high – pushing above $51/MWh for the first time since November, helped by firmer gas and coal prices. Gas prices have been driven higher by a major gas leak, other North Sea production issues and LNG supply concerns, while coal prices have risen on the back of an expected increase in Asian demand.

The gas leak at the Elgin field has led to shutdowns at neighbouring fields and could take months to resolve and this will increase prices over the Summer. LNG worries have been stirred up by news of Qatari maintenance outages in April and September.

Chancellor George Osborne raised the carbon tax to $9.55/TCO2 from April 2014, up from a target rate of $7.28/TCO2 announced last year, but this had little effect on the market. The Carbon Price Floor itself remains unchanged and the expected adjustment reflects the falling price of EUA emissions allowances over the last year.

It has been a volatile fortnight for short-term prices – first dropping as an unseasonable heatwave slashed demand and then surging again as supply tightened due to a gas leak at the Elgin field in the North Sea, which forced its evacuation and closure, and the shutdown of the adjacent Shearwater field as maintenance work was brought forward.

Longer-term prices have also dipped and rebounded, with April Annual ’12 going off the board at a five-and-a-half month high of over 68 p/th, largely because of strength in Summer ’12 prices, which were driven higher by reports that Elgin may be out of action for up to six months as gas relief wells are drilled.

 

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Energy price shift between 15 March 2012 and 01 April 2012

Elec: +3.16%

Gas: +1.76%

Coal: +2.54%

Oil: +0.19%
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