Monthly Price Brief - A Review of European Gas and Power Price Trends: December 2007

Table of Contents

• DATAMONITOR VIEW
  • CATALYST
  • SUMMARY
• ANALYSIS
  • Underlying commodities provided little relief to suppliers as prices soared
    • Underlying commodities provided little relief to suppliers as prices soared
    • West Texas Intermediate and Brent oil price spreads narrowed as prices peaked in December
    • Oil traders' parted from fundamentals as crude futures jumped
    • Coal prices will impact upon key investment decisions in 2008
    • In Europe, gas and oil product prices are decoupling
    • In the UK, there are no clear long-term links between oil and gas prices
    • Brent oil prices and NBP gas prices show little correlation
    • In Germany, BEB gas prices weakly track the crude benchmark
    • BEB outturned at a premium to Henry Hub prices
    • Gas continued to be an important fuel in the stationary sectors
    • European power prices continued to rise, led by French baseload prices
    • In Belgium, near-end prices made an upward adjustment as temperatures dropped
    • In France, wholesale power prices traded at new highs over November
    • In Germany, power prices rose as suppliers came under pressure
    • In the Netherlands, power prices firmed at the near-end of the forward curve
    • In the UK, low temperatures increased prices on all contracts
    • European gas prices increased, but mainly on the near-end
    • NBP contracts rose due to lower temperatures and supply expectations
    • The Belgian gas market mirrored the NBP, as only year ahead contracts fell
• 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
  • Our bespoke services can be tailored to your specific needs
  • Ask the analyst
  • Datamonitor consulting
  • Disclaimer
  • List of Figures
    • Figure 1: The spread between West Texas Intermediate and Brent crude oil prices has decreased over the last quarter
    • Figure 2: Price expectations for crude oil changed dramatically from six months ago, decoupling demand and supply
    • Figure 3: The price of coal will have a significant role to play in 2008' s generation mix and suppliers' long-term investment decisions
    • Figure 4: Although the National Balancing Point and Brent spot markets trade within similar boundaries, the relationship is tenuous
    • Figure 5: NBP gas and Brent crude oil prices show a high degree of year-on-year variation
    • Figure 6: Gas and oil prices showed limited co-movement in the last half of 2007
    • Figure 7: Volatility in world gas markets is evident, with BEB spot prices outturning at a premium
    • Figure 8: Gas accounts for a substantial share of stationary sector energy consumption in the majority of Europe' s biggest economies
    • Figure 9: European power prices continued to rise, led by French baseload prices
    • Figure 10: Contracts at the near-end of the forward curve rose sharply during December
    • Figure 11: A combination of demand drivers and regulatory change firmed French baseload contracts at their highest levels for three years
    • Figure 12: German suppliers remained under pressure as baseload prices continued their upward trend
    • Figure 13: Near-end prices rallied and characteristically followed the German market, increasing on October' s close
    • Figure 14: December saw the most explicit signs of demand-side adjustment in combination with higher supply-side costs
    • Figure 15: European gas prices increased, but mainly on the near-end
    • Figure 16: Colder, less predicable weather affected all contracts at the NBP, most significantly at the short-end of the curve
    • Figure 17: Zeebrugge year ahead prices softened, while all other contracts reacted to changing temperatures and the bullish trend at the NBP
    • Figure 18: Energy pricing proposition
    • Figure 19: Generation spread methodology