Market intelligence from the traders
April 30th 2008

Informed is Inenco’s monthly newsletter bringing you consolidated market intelligence directly from the Energy Traders at Inenco.

The market to date

Gas and power contracts have made significant gains over the last two months due to unexpected cold weather forecasts and bullish oil and coal markets. Below seasonal norm temperatures saw demand increase and significant withdrawals from long-range storage were required to balance the system. Fears over the amount of gas remaining in storage pressured prompt prices higher, however, healthy Norwegian flows added some supply comfort but had little bearish effect on prices.

There have been concerns over nuclear generation as a number of British Energy’s nuclear reactors are currently non-operational. Similarly on the Continent, there were a number of unexpected French nuclear outages and also German strikes at generation plants, which saw Continental gas and power prices spike, and in turn influence the UK market.

Bullish oil and coal markets supported the curve. Oil has remained volatile over the last couple of months and the weakness of the dollar against the Euro has continued to hold the price above the $100 level. In fact, Brent oil had peaked at just over $112/bbl at time of writing. Coal prices gained as several force majeures were called following export restrictions due to bad weather.

Outlook

The UK gas system saw consistent gas flows from Norway during March and this instilled confidence into the market during the cold periods. However, storage gas was still needed to balance the system, keeping prices high. As we have entered April, flows have become erratic adding to the uncertainty over security of supply, especially during periods of high demand driven by colder weather and gas being the preferred fuel for power generation. Demand from Asia coupled with the weak dollar has had a bullish impact on oil prices. Should the dollar strengthen against the Euro, we may see speculators bail out of the commodities markets and prices retreat to more realistic levels. However, with the US driving season approaching at the end of May increasing US oil demand, it may be that oil contracts are pressured further.

Opportunities

Forward flexible wholesale buying offers greater potential benefits than the current long-term, fixed, retail deals on offer. For further information on strategies for longer term purchasing contact Inenco on 08451 46 36 26 or email informed@inenco.com.

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