Energy Market Risk Analysis | early August 2012

Oct ’12 Annual hits new 27-month low

October ’12 Annual UK power dipped to a fresh 27-month low – of £46/MWh – at the start of the fourth week of July, as energy markets shunted lower in line with financial markets, pounded by further eurozone pessimism and China slowdown fears. But prices were soon rebounding, following an announcement by the European Central Bank (ECB) that it was “ready to do whatever it takes to preserve the euro”.

October ’12 Annual was lifted back in line with where it was in mid-July as a result, to just above £47/MWh. Annuals further forward have been even stronger over the last fortnight – with October ’13 Annual, for example, up £0.8/MWh – which has prised inter-Annual differentials wider.

 

Annuals up, short-term down

A flurry of LNG deliveries in late July/early August is helping to offset the impact of a sharp reduction in gas imports from Norway, pushing Day-ahead prices below 52 p/th and towards their lowest level this year. Meanwhile, longer term prices have kicked higher in recent days, prompted by an upwards swing in economic sentiment and oil prices.

The October ’12 Annual benchmark gas price is up around 0.5 p/th over the last fortnight, despite having dipped to a 17-month low in the fourth week of July as part of a general energy market sell-down.

 

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Energy price shift between 17 July 2012 and 02 August 2012

Elec: +1.13%

Gas: +1.45%

Coal: +2.41%

Oil: +2.6%
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