Energy Market Risk Analysis – early February 2012

Prices spike as Big Freeze bites

Plummeting temperatures in the UK have caused a spike in UK power and gas prices in recent days, not just on the short-term market, but also on the longer term market.

Seasons and Annuals witnessed some of their biggest ever one day gains on January 27th as severe cold weather warnings were issued – Summer ’12 UK power surging £2.8/MWh, or 7%, and April ’12 Annual bounding up by £1.8/MWh.

The anticipation of Arctic weather hitting the UK had almost as much of a dramatic impact on prices as its actual arrival. Forecasts of the onset of freezing temperatures propelled both short and longer term gas prices higher on January 27th, with Summer ’12 and Day-ahead both witnessing a 4 p/th one–day surge.

But as the cold started to sweep across the country, markets took a step back, Day-ahead digging in around 61 p/th and the Annuals and Seasons dropping sharply.

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Energy price shift between 16 January 2012 and 01 February 2012

Elec: +6.09%

Gas: +6.81%

Coal: +2.83%

Oil: +0.61%
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