Energy market summary

July to September 2011

The period had a moderately steady start; however August saw prices drop significantly due to the unease surrounding the debt crisis in Southern Europe. The curve managed to recover from this as a result of rebounding fuel prices, but went on to experience some volatility. At the end of the period above average temperatures caused the power curve to fall.

Comments from the last 3 months

A: A power station unexpectedly going offline at the beginning of July tightened supply causing an increase in the power curve, however prices then fell with lower than average temperatures to bring the curve back down.

B: Concerns over global growth and pressure over the wider debt crisis in Southern Europe caused a steep decline in the curve at the start of August. Mid-month the equities market fed through to gains along the power curve, with higher fuel prices and stronger gas prices. Macroeconomic concerns drove down fuel prices in a wider sell-off which saw stock markets pull back sharply and the curve drop again, however the curve stabilised with rebounding fuel and equities market. End of August sharp gains continued in gas and power contracts on returning from the bank holiday.

C: There was a fall in the power curve because the UK gas system was oversupplied, due to a lower level of exports from the UK than expected. Forecasts showing temperatures at or above seasonal norms also contributed to the decrease but was limited due to the knowledge of the clocks changing at the end of October, where demand is expected to rise.