Global oil was back in the driving seat of the energy complex after breaking a five-week bear trend with a rebound that pushed prices back up to 120 $/bbl. The increase was driven by escalating tensions between Russia and the West, a weaker dollar and fears of a production cut by OPEC. Although the other energy commodities moved in tandem with crude, changes in fundamentals specific to each market were also responsible for the price movements. In the coal market, spot and forward prices moved upwards as China slapped an export tax on coal, whilst North European gas spot and prompt winter forwards were also up on news of a major North Sea oil field coming off stream after a leak was discovered, a development that also had an impact on forward coal prices. Carbon prices extended their gains on more bullish fuel switching prices as well as on the increase in forward German power. Indeed, although North European spot electricity prices remained on the low side as a result of the muted seasonal demand, forwards further out on the curve were pushed up significantly by the all around increase in forward fuel costs.
Buy/Free trial
It was a singular week for European and global energy commodity markets, with coal, gas, carbon and power trading decoupled from the declining oil prices. Global crude prices extended their bear run and dropped to levels 23% below the records hit during July, driven by downbeat economic outlooks, increasing signals of demand destruction worldwide and a stronger dollar. European coal prices registered the first weekly gain since mid July, taking direction from stronger freight rates and renewed tightness in the Pacific Basin. Forward gas contracts in Northern Europe posted across the curve gains, taking direction from the rebound in coal prices and ignoring the developments in the oil market. Prompt gas markets also looked fairly strong, following supply disruptions in the UK market. The North European power systems continued to look very healthy, keeping prompt power prices depressed, but forward prices firmed across the curves along with coal and gas. European carbon allowances also ignored fundamentals for a second consecutive week, seemingly taking direction from the increase in German power and disregarding the bearish signal of lower implied fuel switching prices.
European and global energy commodity markets had another bearish week, with falling oil prices on the driving seat once again. Prompted by downbeat economic outlooks and a stronger dollar, global crude prices extended their bear run and dropped to levels almost 20% below the records hit during July. European coal prices took direction from the slump on the oil markets, lower freight rates and from the traditional low August demand levels in Europe. Prompt gas and power markets looked fairly depressed on good availabilities and low demand levels typical of the holiday period. The bearish sentiment was also present in the gas and power forward markets, which appeared to track oil. European carbon allowances were the odd ones out last week, as prices moved seemingly against all fundamental indications. The benchmark 2008 contract gained some ground on a combination of technical trading and a bullish sentiment attributed by some to news that the EU will establish a formal link between the UN’s ITL and its CITL before November this year.
European and global energy commodity markets had a week of mixed developments. After several weeks of high volatility, oil traded within a much more reasonable band, as the bullish signals from Nigeria and lower U.S. inventories, balanced out with bearishness from a stronger dollar and conservative price forecasts from OPEC. European spot coal prices were nominally sideways, whilst forward prices, which had their first weekly gain in weeks, strengthened as FOB prices rose from bullish news on the Chinese energy situation and from further supply problems in Russia and Poland, although the full extent of these bullish movements was not felt due to softer freight rates. Spot gas prices, on the other hand, came crashing down as a supply surplus took hold of the UK market, a development that had a mixed effect on forward prices, which softened slightly at the prompt but strengthened even more slightly at the back. EUAs were pulled down by the bearish fuel relativities, lower forecast emissions and the issuance of allowances by France. North European spot power prices firmed slightly, but the general bearish sentiment prevailed, reflecting fairly healthy systems and low demand levels during the holidays. Forward power prices were almost unchanged week-on-week, with the only exceptions being the month-ahead contracts, which eased-off on a bearish prompt and the improvement of the hydro reservoirs in the Alpine region.
Oil was once more in the driving seat as the key downside factor for energy prices. Spot and forward oil declined on a stronger dollar, easing fears about a tropical storm in the Gulf of Mexico and higher inventories in the US, against a backdrop of little news on the geopolitical front. Forward gas, coal and power prices were all down with oil, although spot gas and power were volatile respectively as a result of variable Norwegian flows and wind production in Germany. With coal dropping more than gas, the relative evolution of the energy forwards was, however, a bullish signal for EUAs, which rose steadily between Monday and Thursday.