Monthly Price Brief - A Review of European Gas and Power Price Trends: May 2008

Content

• Datamonitor View
• Catalyst
• Summary
• Analysis
  • The Dutch Ttf Spread Is Narrowing As The Nbp's Premium Value Is Eroded Over Time
  • A Consistently Narrow Differential Over Time Characterizes The Nbp And Zeebrugge Gas Markets
  • The Close Proximity Of The Uk And Belgian Gas Hubs Has Given Little Scope For Arbitrage
  • The Nbp Contract Spreads Show The Range And Depth In Trading Both Spot And Forward Products
  • Seasonal Summer Contracts Show A Propensity For Narrow Spreads Over Time
  • Short-Run Supply-Side Factors Are Not Responding Quickly Enough To The Market's Demands
  • Oil Market Fundamentals Are Dynamic, With Supply-Side Effects Difficult To Model Accurately
  • Oil Price Inflation Has Been Phenomenal And Continues To Super-Peak
  • The Long-Term Consolidation Of Oil Prices Is Not Good News For Consumers Or Producers, As Inflation Is Set To Continue
  • Oil Price Expectations Of Supply Have Pushed Up The Futures Curve, Revealing The Change In Sentiment And Market Outlook
  • Spreads Between Products Change Over Time And Reflect The Nature Of Demand-Pull Factors, Such As The Driving Season In The Us
  • Spreads Between Products Change Over Time And Reflect The Nature Of Demand-Pull Factors, Such As The Driving Season In The Us
  • Inventories And Stocks For Gasoline Products Will Be A Key Factor As The Driving Season Starts In The Us
  • Inventories And Stocks For Gasoline Products Will Be A Key Factor As The Driving Season Starts In The Us
  • A Closer Inspection Of Oil Prices, In Historical Context, Reveals The Magnitude Of The 2007/08 Spike
  • A Closer Inspection Of Oil Prices, In Historical Context, Reveals The Magnitude Of The 2007/08 Spike
  • Reserves Data Shows A Decline In Overall World Production, However, Peak Oil Theory Is A Highly Unlikely Outcome
  • Consumption Patterns Show A Gradual Rise That Will Not Worry Forecasters And Supply-Side Analysts
  • Production And Consumption Woes Will Diminish Through The Course Of 2008/09
  • Near-End Baseload Prices Dipped In May Due To Bearish Power Trading On The Month-Ahead Contract
  • As Belgian Month-Ahead Prices Fell, Most Other Contracts Firmed Going Further Out On The Curve
  • French Power Prices Climbed Higher Through April, With The Exception Of Month-Ahead Prices
  • German Baseload Power Curves Firmed Going Out And Fell At The Near End
  • Dutch Power Prices Firmed, Particularly On The Quarter-Ahead Contract
  • Uk Baseload Power Prices Firmed, With Month-Ahead Peaking
  • Bullish Gas Contracts Continued To Firm Across Europe
  • Gas Contracts At The Nbp Are Close To Reaching Long-Term Highs
  • Holland's Ttf Gas Market Replicated The Bullish Sentiment Currently Prevailing In European Markets
  • Tightness And Market Sentiment Firmed Prices At Zeebrugge
• Appendix
  • This Brief Builds Upon Datamonitor's Extensive Pricing Proposition
  • Glossary
  • This Brief Contains A Number Of Industry Standard Terms
  • Our Analysis Builds On Other Sources To Provide Greater Insight
  • Further Reading
  • Extended Methodology
  • We Assess The Profitability Of Fossil Fuel Plants Across Northwest Europe
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  • Datamonitor Consulting
  • Disclaimer
  • List Of Figures
  • Figure 1: Uk-Dutch Spreads Illustrate The Dynamics Of Cross-Border Trade Over The Last 12 Months, And The Narrowing Price Differentials
  • Figure 2: Spot And Forward Price Spreads Are Virtually Non-Existent Between The Nbp And Zeebrugge
  • Figure 3: Comparatively, The Geographic Proximity Of Bacton And Zeebrugge Provides Price Symmetry
  • Figure 4: Minimum/Maximum Spreads Between 2004 And 2008 Illustrate A Broad Range Of Speculation
  • Figure 5: A Comparison Of Minimum And Maximum Spreads Between 2004 And 2008 Is Given Below
  • Figure 6: At Present, Oil Supply Is Not Adjusting Quickly Enough To Changes In Demand, Due To Its Inelastic Nature And Production Constraints
  • Figure 7: The Dynamics And Decomposition Of Supply And Demand Have Become Opaque And Difficult To Estimate
  • Figure 8: Oil Prices Are Breaking Records With Soaring Prices That Look Set To Continue During The Second Half Of 2008
  • Figure 9: Forecasters Have Adjusted The Future Price Of Oil As The Recent Surge In Prices Has Caused A Significant Realignment Of Prices Going Out
  • Figure 10: Both The Nymex And Ice Crude Oil Forward Curves Illustrate A Major Shift In Sentiment As Production Speculation Is High
  • Figure 11: Brent Crude Oil Is At A Premium To Wti Crude Oil
  • Figure 12: Over Time, Crude Oil Spreads Look Set To Meander And Grow As Brent And Wti Part
  • Figure 13: Total Stocks For Both Oil And Petroleum Products Are In Reasonable Shape
  • Figure 14: Gasoline Stocks Will Be Challenged Through 2008's Peak Demand In Driving Season
  • Figure 15: The Short-Term Picture Highlights The Fact That 50% Of Observations Lie Below $80/Barrel
  • Figure 16: In Comparison To The Short-Term View, The Long-Term Median Value Is Around $20/Barrel
  • Figure 17: Reserves Point Towards A Gradual Decline In Line With Indo-China Economic Growth And Weaker-Than-Forecast Global Demand
  • Figure 18: Tracking Global Oil Consumption Illustrates That Although We Have Seen A Growth In Demand
  • Figure 19: The Changing Nature Of The Core Demand And Supply Fundamentals Leads To Uncertainty, Volatility And Speculative Trading
  • Figure 20: Near-End Baseload Prices Dipped In May Due To Bearish Power Trading On The Month-Ahead Contract
  • Figure 21: In The Month To May, All Belgian Baseload Power Prices Firmed, Except Month-Ahead Contracts, Which Softened
  • Figure 22: French Baseload Prices Took A Slight Dip At The Near End, Despite Significant Firming Further Out
  • Figure 23: The Outlook In Germany Was In Line With The Rest Of Europe, With Near-End Prices Falling And Longer-Term Strips Firming
  • Figure 24: The Dutch Market Showed The Lowest Levels Of Swing In Comparison To Its European Neighbors
  • Figure 25: Indifferent To European Power Market Movements, Prices Firmed On The Month-Ahead In The Uk, As Well As On Contracts Going Further Out
  • Figure 26: Bullish Gas Contracts Continued To Firm Across Europe
  • Figure 27: Contracts Rose Across The Board At The Nbp As Bullish Sentiment Reacted To Both The Oil Price And European Gas Prices
  • Figure 28: Dutch Gas Prices Firmed, Continuing The Pattern Since Q4 2007 Of Gas Prices Having A High Degree Of Dependency On The Oil Price
  • Figure 29: Zeebrugge Gas Prices Shadowed The Nbp And Ttf, Eliminating The Opportunity To Arbitrage And Illustrating The Prevailing Uncertainty
  • Figure 30: Energy Pricing Proposition
  • Figure 31: Generation Spread Methodology