Energy Market Risk Analysis | early January 2013

Short-term surges; forwards flat

All the price movement has been in the short-term market over the last fortnight, as cold weather and a gas supply squeeze – added to post-holiday demand kicking in – pushed Day-ahead prices £10/MWh, from £45/MWh to £55/MWh.

Forward prices meanwhile have moved little since the start of the year, when US economic optimism provided a small leg-up, remaining comfortably in the long-term price channel that established itself in the second half of 2012 – April Annual ’13 talk centred on £51.5/MWh and October ’13 Annual £2.2/MWh above this.

Day-ahead spikes on cold, outages boost short-term

Cold weather and a series of unexpected outages have pushed short-term prices higher while the upwards momentum that seized the longer term market as the new year started has now stalled. The taking of hostages at an Algerian gas field which supplies 2% of European demand has had little market impact as yet, as analysts expect any shortfall to be made up by supplies from elsewhere, including Russia.

Day-ahead rose from less than 62 p/th to 69 p/th over the first eleven days of the month, as the return of freezing temperatures boosted consumption and cutbacks.

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Energy price shift between 02 January 2013 and 17 January 2013

Elec: +0.42%

Gas: +0.67%

Coal: +6.03%

Oil: -1.41%
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