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Energy Market Analyst | All issues

Energy Market Monitor | All issues

06.05.08  Energy Market Analyst: January - March In this issue of EMA we look at the developments of the first quarter of 2008, where energy commodities continued to break records, with oil, gas, coal and power all closing the period at levels significantly above those recorded over the same quarter in 2007. After a muted start to the year, EUA prices finally took the same direction as the energy complex and began rising at the start of February. This issue also looks in detail at the freight markets for oil and coal, where we show that, in this very cyclical market, prices could come down over the next couple of years. However, the extent to which that occurs will be largely determined by the incremental demand for dry bulk commodities arising from Asia during that period.   Buy/Free trial

06.05.08  Energy Market Monitor: Week 19 Energy markets were bearish as a stronger dollar, higher inventories and an improvement of the supply disruptions in Nigeria brought oil prices steadily downwards during most of the week. EUAs seemed to follow oil, as gas prices were volatile in the aftermath of the Forties pipeline restart and coal prices moved sideways, supported by freight rates amid low European demand. Prompt power prices were range bound on a combination of lower demand and a constrained system from several large nuclear plants undergoing maintenance, before they slumped at the close of the week as the May holiday began. Forward power prices followed the rest of the energy complex and also softened over the week.   Buy/Free trial

28.04.08  Energy Market Monitor: Week 18 Oil markets broke new nominal records throughout most of the week as the dollar continued its slide and oil infrastructure was yet again attacked by rebels in Nigeria, but an end of week rebound in the greenback provided a much needed breather to the markets. European gas prices were also on the rise, and shot up at the close of the week as the market priced in the impact of the closure of the Forties pipeline, which supplies a third of the UK’s oil and gas, due to the strike at Grangemouth refinery in Scotland. With European gas-fired generation out of the money across all contracts, coal was in good demand in Europe, stiffening the competition for South African coal and pushing up commodity prices, a situation that was further exacerbated by rising freight rates. North European prompt power prices continued to decline, but were volatile, as higher temperatures prompted lower demand but were accompanied by very variable levels of wind production.   Buy/Free trial

21.04.08  Energy Market Monitor: Week 17 A bullish sentiment pervaded energy markets this week as oil prices surged in response to supply issues in Nigeria, Mexico and Russia, which compounded the effect of further losses of the embattled dollar. Coal prices were also on the rise as Atlantic demand for the fuel returned, given its current preference for baseload power generation during the European summer. Indeed, although Europe's gas prices rose and then softened over the week in response to varying supply flows, extractions from storage and rising temperatures, their current levels relative to coal prices meant that average coal fired generation costs remained in the money in the continent and the UK. In turn, these effects continued to buoy European emissions prices, which were also up and then down, but closed the week above the preceding week's levels and so maintained the bullish trend. Prompt power prices were the exception, dropping from the previous week's highs thanks to healthy wind output and the milder temperatures, although levels remained above seasonal averages.   Buy/Free trial

14.04.08  Energy Market Monitor: Week 16 The whole energy complex was up this week, taking its lead from a surge in global oil markets that drew strength from a weakening dollar and a significant decrease in US crude inventories. Coal broke out of its limited downward trend, ramping on a rumour of a record price paid for Newcastle coal by a Japanese buyer. The increase in coal prices was matched by an increase in gas prices, which drew on the oil market strength and the prolonged end to winter like temperatures in Northern Europe. The net effect of this on the carbon market was to leave the fuel switching price largely unchanged at levels in excess of current EUA prices. The bullish signal from fuel switching and the bullish oil market helped support the continuation of last weeks bull run in the EUA price, widening the spread over secondary CERs in the process. European power prices drew strength from all of these and, helped by the start of the planned outage season, this resulted in spiking prompt prices and curves finishing at the highest points that they have been over the last few months.   Buy/Free trial

07.04.08  Energy Market Monitor: Week 15 The global oil market was up and down, closing the week down on some good supply news from Iraq which over-shadowed an announced decrease in US crude inventories. Coal continued its downward trend this week in light trading, correcting on news that Australian production was returning back to normal after the storm induced closures of the last few weeks. The softening in coal helped increase the needed fuel switching price again, and this combined with the publication of a rise in verified emission numbers in 2007 (up from 2006) provided the needed support to push the CO2 contract above the 24 €/t level. European gas markets surged on the back of cold weather at the prompt, which dragged the whole curve upwards as high demand persisted into the storage injection season. European power saw upward pressure on the back of the weather, outage and the increases in gas and CO2, with the curves finishing at the highest points that they have seen over the last few months.   Buy/Free trial

31.03.08  Energy Market Monitor: Week 14 A combination of geopolitics, a weaker dollar and lower than expected US inventory levels pulled oil unexpectedly back up. Coal followed suit, with higher freight rates exacerbating the effect of renewed interest in South African coal from Pacific basin buyers. Although stable at the prompt, forward gas prices were also up, as were EUAs, both of which trended upwards on the general bullishness of the energy complex. Power prices were soft over the Easter weekend, but bounced back up at the prompt –as colder weather hit Europe– and further out on the curve –in response to the higher fuel costs.   Buy/Free trial

25.03.08  Energy Market Monitor: Week 13 Global oil markets retreated this past week in the face of significant upheaval in the financial sector, leading to increased worries over demand and heavy selling by financial players. Coal prices also saw some much needed softening on the back of a large European utility being rumoured to be selling coal heavily and news that China could be re-entering the export market. European carbon market prices were no exception and fell back from last weeks high, following the wider energy complex downwards. North Europe's power and gas markets prices were supported by lower temperatures on the prompt side, but declined across the curve following the rest of the energy complex.   Buy/Free trial

17.03.08  Energy Market Monitor: Week 12 The global oil market continued its upward march last week, taking strength from the weakness in the US dollar, and despite an increase in US crude inventories and a resolution to the tensions between Venezuela and Colombia. Coal stumbled again this week with light buying easing the commodity to a greater extent than provided by the increase in freight rates . Softer coal helped increase the needed fuel switching price for a second straight week, and this , along with the wider bullishness from oil, provided support to push the EUA 2008 contract above the 22 €/t level. European gas markets traded largely sideways in a week with little incident. The gas curve did not respond to the pressure from oil – but neither did it soften and with annual strips still trading at a premium to the oil-indexed prices, they still look like they have plenty of downside potential. European power saw downward pressure on the prompt with healthy wind, and with coal coming off and the CO2 contracts rising, the curve finished the week with little change over the week.   Buy/Free trial

10.03.08  Energy Market Monitor: Week 11 The global oil market was down and then up, with prices closing again above the 100 $/bbl level following some supply concerns from Venezuela’s confrontation with Colombia, a weak US dollar and confirmation that OPEC will not move to ease the market any time in the near future. Coal tumbled, with light buying pushing the commodity down by more than the increase in freight rates that was also seen. The softening in coal helped increase the needed switching price, and this provided some support for a CO2 contract that saw little week on week change. European gas markets rode out some temporary reductions of Russian supplies to the Ukraine and the fire at Bacton, to see prompts largely trading sideways. Despite this, the curve continued to be pulled up with oil, and with summer prices now trading at a premium to the oil-indexed prices, where respite from these prices will come remains a question. With coal coming off and prompt power markets kept moderate by the wind, the power curve finished the week with forward contracts down on last week's high.   Buy/Free trial

03.03.08  Energy Market Monitor: Week 10 The global oil market continued to rise, with prices closing at above the 100 $/bbl level following some further supply concerns in Nigeria, a weak US$ and continued signs that OPEC will not move to ease the market. Coal followed, with prices rising at the end of the week on renewed buying in a tight market. While gas was quiet most of the week, the prospect of Russian supplies to Western Europe and a fire at a major gas import terminal left both the spot and curve contracts looking like they would increase further. This comes against a background of gas contracts for the coming seasons that were already trading at levels that looked high and hard to sustain. With only CO2 softening week on week with the implied switching price, the power markets finished the week with forward contracts at record high levels. With most of the bulls still stomping around these energy markets, we can still see higher prices on the horizon.   Buy/Free trial

25.02.08  Energy Market Monitor: Week 09 Last week was marked by the oil market being the star, with a price surge above 100 $/bbl being driven by supply concerns in Nigeria, tension between Venezuela and the US, and US refinery outages. Although prices softened from their within week high, the strength in oil was enough to drag the carbon, gas and power curves upward. Coal was the only market to soften, where rumours of Chinese exports helped spur a small downward price correction. While prompt markets in European energy were pushed around by changing weather, the strength in the underlying curve leaves gas contracts, in particular, looking hugely overvalued.   Buy/Free trial

18.02.08  Energy Market Monitor: Week 08 Energy markets were on the rise this week, as oil and coal prices advanced. Oil was up on more upbeat signals of economic growth, lower inventories, supply disruptions and a growing dispute over the nationalisation of production assets in Venezuela. Coal had yet another record-breaking week, driven by supply issues in Australia and South Africa and rising freight rates. More bullish fundamentals, weather in particular, pulled up gas and power prices. The odd ones out were EUAs, which declined over the first half of the week as coal prices rose, but rebounded in the second half following gas, German power and oil.   Buy/Free trial

11.02.08  Energy Market Analyst: Review of 2007 In this issue of Energy Market Analyst we review the main developments of the energy complex in 2007, where a series of contingencies in oil, coal and gas supply combined with growing Asian demand to push energy prices up to record levels. Our special topic looks at the evolution of road transport emissions against the back-drop of the EC’s desire to see a 20% reduction in 1990 CO2 emissions by 2020. We find that the increase in emissions from growing motorisation in the EU would be difficult to offset through relying on gradual improvement in vehicle emissions limits and the current proposals for sustainable bio-fuels.   Buy/Free trial

11.02.08  Energy Market Monitor: Week 07 This week saw little change in the oil, coal and European power markets but, some trend reversions in the EUA and European gas markets. Oil, coal and power were trending very slightly downwards with little changes in the fundamentals and geopolitical fronts. On the other hand, a supply outage in the UK pushed up gas prices towards the end of the week, prompting higher demand for EUAs. This time around, however, the usual sellers of the allowances were making themselves scarce, and EUA prices followed gas in its end of week rebound.   Buy/Free trial

04.02.08  Energy Market Monitor: Week 06 Energy markets were buoyant this week with oil increasing on some better economic data and coal surging on the back of supply problems in South Africa, Australia and China. European gas saw little movement with the end to the winter period now within sight, and continued strength in summer prices being pegged up to the oil-indexed price levels. EUAs continued to drop, with heavy selling of secondary CERs helping to drag EUA prices down . The sell-off was driven by EC proposals published over the preceding week, which suggested that no CERs above the volume already specified for Phase II would be allowed in Phase III, unless an international agreement on emissions reductions is put in place. While this should bring upwards pressure to bear on the EUA price in the long-turn, its immediate impact was to drag the whole carbon market downwards. Power markets felt the tension between the increasing coal and decreasing CO2 prices, and posted some upward gains as the former effect was larger than the latter.   Buy/Free trial

28.01.08  Energy Market Monitor: Week 05 Energy markets swung down and up in a week characterised by turmoil and uncertainty in global equity markets. Oil prices receded during most of the week, and rebounded back on Friday along with global equities on news of Chinese growth figures and positive sentiment from the prospect of US emergency economic measures. Coal prices also dropped on the bearish sentiment, but subsequently recovered as reports of serious supply problems materialising in both basins emerged at the close of the week. European gas traded largely sideways amid mixed signals of mild weather and an isolated supply issue, whilst power also had a muted week as a result of low seasonal demand and good capacity margins. EUAs were the most affected by the nervous atmosphere and dropped to a five month low, despite mid-week bullish signals from the EC proposal for modifying the ETS Directive.   Buy/Free trial

21.01.08  Energy Market Monitor: Week 04 Energy and carbon markets all lost ground this week, driven largely by growing concerns about economic slowdown. Oil was down on an increasingly gloomy outlook for the US economy and higher than expected inventory levels. In the coal market, although spot prices traded sideways, forward prices for delivery into Europe also declined on the back of tumbling freight rates. The latter, in turn, was possibly an over-correction in what remains a tight market. Below average demand linked to mild weather and healthy supply was responsible for the observed decline in gas prices. A reduction in the implied CO2 price required to encourage a switch from coal to gas prompted a softening of 2008 EUA prices.   Buy/Free trial

14.01.08  Energy Market Monitor - Week 3 Unexpected movements in the oil and gas markets surprised energy market players this week. Oil prices were down on growing concerns over the US economy, but European gas prices did not follow suit , moving in the opposite direction on the back of weather, supply and storage issues in the UK. Coal was up as well, with a decline in freight rates failing to halt the rise in prices sparked by a supply incident in the US and healthy Asian and European demand. The odd one out was carbon, which despite hitting a high on Monday, traded mostly sideways during the rest of week , driven by contrasting signals from the energy complex.   Buy/Free trial

07.01.08  Energy Market Monitor: Week 02 2008 Energy markets moved in different directions this week, with the bullish side dominated by: oil, which flirted briefly with the 100$/bbl level as geopolitical tensions mounted and US inventory levels continued to disappoint; by gas, where European prices rose in conjunction with weather driven demand; and by EUAs, which made significant gains as utilities kicked off the start of the EU ETS Phase II with a fresh appetite for allowances, amid bullish signals from the wider energy complex. Coal prices continued their sideways drift, masking the mutually cancelling effects of higher FOB prices and lower freight rates, while power prices softened on low seasonal demand and good wind output.   Buy/Free trial

24.12.07  Energy Market Monitor: Week 52 Markets were relatively quiet in the run up to the holiday period, with most commodities moving sideways. Countervailing signals -bullish ones from geopolitical tensions and low US stocks, and bearish ones from milder weather and economic forecasts, and comments from OPEC- kept oil prices pretty much range bound. European coal prices were also rather unchanged, as were EUA prices, which traded within a very tight range despite the outcome of the Bali conference and amidst generally bearish fuel fundamentals. Gas and power prices were the exception, with both markets rising mainly on the back of colder weather across Europe and some scattered, albeit minor, supply incidents.   Buy/Free trial

17.12.07  Energy Market Monitor: Week 51 Markets returned to bullish mode, with most energy commodities making gains week-on-week. An oil spill in the North Sea, geopolitical tensions and decrease in US inventories were the main drivers behind the strengthening in oil prices. Coal prices were supported by renewed buying interest from European utilities and stronger FOB, whereas gas and power were mostly lifted by the arrival of low temperatures across Northern Europe. The surprise came from carbon, whose prices traded within range this week as the bullish signals from the energy complex were offset by bearish signals from the CER market.   Buy/Free trial

10.12.07  Energy Market Monitor: Week 50 There was relative calm in the energy markets this week. A market more concerned with economic slowdown saw oil trading sideways, despite bullish signals from an OPEC decision and falling inventories in the US. European coal prices continued their four-week long sideways drift. Gas bobbed up and down on lower seasonal demand that was countered by supply issues, as did CO2, where diverging forecasts of CER/ERU supply and bearish signals from the fuel price complex kept prices range-bound. The growing availability of nuclear plants in France produced much less volatile continental power prices and greater price convergence across markets.   Buy/Free trial

03.12.07  Energy Market Monitor: Week 49 It was a week in which oil saw the start of a correction with prices easing back to the 90 $/bbl level with some good inventory news and a limited strengthening of the US$. Coal continued to be range bound at historic high levels although this masked volatility in Richards Bay prices, CO2 fell back as European gas prices eased on the back of warmer than average weather. Power pricing was more muted this week as better availability of nuclear plant in France and Germany helped ease these markets.   Buy/Free trial

30.11.07  Energy Market Analyst: September – October This issue of the Energy Market Analyst looks at the behaviour of the energy and carbon markets over the last few months – charting the steady rise of the energy complex. This edition’s special topic looks at the implications of the EC's 20 / 20 / 20 targets for the longer term carbon market. The report finds that meeting the EC emissions reduction targets hangs largely on attaining ambitious energy efficiency and renewable generation targets. Success in reaching those efficiency and renewables goals are crucial to achieving significant emissions reductions from the power sector. In particular, failure to meet the efficiency target will require significant additional investment in renewable energy to make up for the shortfall.   Buy/Free trial