Energy Market Risk Analysis – mid February 2012

Big Thaw, but oil tensions rise

Prices across UK gas and power markets continued to be squeezed higher at the start of February as the cold snap tightened its grip and temperatures and snow fell across the entire country. While short-term gas hit a six-year high, short-term electricity prices also surged, Day-ahead trading up to at least £72/MWh, its highest level since December 2010. Longer term prices also rose, with April ’12 Annual power breaking above £49/MWh for the first time since before Christmas.

The return of milder weather has now brought prices lower, but not back to pre-Big Freeze levels.

Prices on both the short and longer term UK gas markets have fallen back from the highs seen during the freezing weather, thawing as temperatures have rebounded towards seasonal norms.

Day-ahead prices hit a high of 101.5 p/th in the second week of February as the cold weather reached its icy peak, but have slipped back as low as 56 p/th in recent days.

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Energy price shift between 01 February 2012 and 16 February 2012

Elec: -0.26%

Gas: +0.91%

Coal: -1.68%

Oil: +6.02%
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