Mild weather puts bearish pressure on the prompt npower energy market update – 24/11/11

Unseasonably mild weather for November has put bearish pressure on the prompt and the balance of winter power and gas contracts, says npower.

The news was reported in the company’s latest energy market update, designed to help energy professionals better understand the UK power market to more effectively manage their energy price and volume risks.

Magali Hodgson, npower’s expert from its award-winning Optimisation Desk, comments: “Last week, continued unease around the future of the Eurozone, tensions between French and German leaders, and the auction of French and Spanish bonds weighed heavily on the market, with Brent oil prices losing $5/bbl over the week to close just below $108/bbl. Coal also lost ground, losing $1/tonne at the beginning of the week, then staying steady at $117/tonne. Coal was the fuel of choice, with its generation on average six per cent higher than gas.

“Weaker fuel filtered through to seasonal gas and power, with the Sum’12 baseload power contract closing the week beginning 14th Nov down by £0.9/MWh, having gone through its £49.20 resistance level. Also, the continued mild weather did put some bearish pressure on the prompt and the balance of winter power and gas contracts.

“Looking forward, with Eurozone concerns persistently weighing on the energy complex, Brent looks to continue with its bearish trend. Big losses on the power curve can only be expected if oil and coal prices lose value. If we look back 18 months ago, UK seasonal power prices were £10 lower than current levels but coal and oil prices were $30 lower.

“We are still yet to see short-term temperature forecasts dropping to levels normal for this time of year. This unseasonable warmth, combined with healthy LNG and storage levels, all weigh on the prompt and balance of the winter contracts. If and when we do experience a cold snap, prompt and near curve power prices will be expected to spike.”

The npower energy market updates are filmed on a fortnightly basis by independent news agency, Energy Live News. They are delivered from npower’s Optimisation Desk, which is a unique service that provides businesses using flexible purchase energy contracts with access to information on the UK wholesale energy market and up to date advice on an individual basis.

For more information and to access the updates go to http://www.npower.com/Large-Business/Energy-news/Market-update/index.htm. To suggest a market update topic of interest or to discuss its content, please contact Magali Hodgson at npower by emailing business@npower.com.