Energy market summary

October to December 2011

As the period entered into the winter months, prices fell throughout, caused primarily by the unforeseen above average seasonal temperatures. The curve saw slight fluctuations due to spells of cooler temperatures and the EU debt deal causing uncertainty in the market. This, however, did not lessen the impact of the continued descent.

October

October saw the curve falling due to above average temperatures for the season, rising nuclear output and higher wind generation combined with lower demand expectations. The curve’s attempt to rebound caused numerous fluctuations, influenced by bouts of colder weather, and the renewed uncertainty surrounding the eurozone debt crisis, but it wasn’t enough to prevent a decline in the curve.

November

November saw the largest overall fall in the quarter. Plant outages combined with nuclear maintenance, as well as an increased risk of colder weather, drove up gas prices and hence drove the power curve up at the beginning of the month. However, milder weather eroded the winter risk premium and delayed storage gas withdrawals, putting gas prices under pressure and thus bringing the curve into constant decline for the rest of the month. It was further decreased by losses in gas and emissions at the end of the month.

December

The beginning of December saw an initial rise in the curve due to below seasonal temperatures and rising gas prices, as well as increasing wind forecasts which brought uncertainty over wind generation. Prices then fell steeply with a weak fuels complex. Towards the end of the month Summer 2012 slid to a 20-month low, and there were weaker gas prices and contracts dropping back in the run-up to the holiday on above average temperatures and increased supply from plant restarts.