Market report December 2007

Transcription

1 Market report December Power - Certificates - Coal

2 Disclaimer: This document is published by RWE Trading GmbH for information purposes only. It was not written or compiled with the intention that this information be used as the basis for an investment decision with respect to a commodity, market, contract or any other product and it should not be used for any such purpose. The information in this document is put at the reader s disposal without any guarantees being given. RWE Trading does not guarantee, neither expressly nor implicitly, the correctness and completeness of the information nor its suitability for any specific purpose. Preliminary Remarks: Before the introduction of COB2B certificate trading, the European energy markets only had very low levels of interaction. There were correlations between the National Balancing Point (NBP) for Gas in Great Britain and the oil index of the International Petroleum Exchange, but there was no connection between power in Scandinavia or Germany and the NBP. The new COB2B market mechanism has interconnected the power and the gas and oil markets in Europe. COB2B is the connecting link between UK gas and continental power. From this it follows that: the development of power prices is similar throughout Europe the COB2B trading mechanism has strengthened the connection between the power and the gas/oil markets. This has resulted in a correlation between the European power markets. Certificate trading is the link between the different energy sources and the markets. the direct influence of primary energy sources on power prices has increased and through the COB2B certificates so has power price volatility.

3 Power Spot Market: At the start of December the prices on the spot markets were weak, quoting at 44.59/MWh for the base load and 66.85/MWh for the peak load. This reflected the weather conditions during the first days of December which were characterised by mild temperatures and an abundance of wind. Lower temperatures and an decrease in the amount of wind-generated power resulted in a continual increase in prices driving the spot price for base load deliveries up to 86/MWh on December 13. After this peak it tended back towards its previous price level. However, a cold snap in Germany and the virtually non-existent supply of wind-generated power resulted in a price jump up which, on December 19, brought the price up to /MWh for the base load and /MWh for peak loads. This was also the high for the month. After this peak, the prices immediately went down again and as was to be expected the Christmas holidays lead to lower prices so that the month and the year 2007 finished at the very low level of 27.19/MWh (-26.21) for the base load and 34.48/MWh for peak loads. The high spot prices during the second and especially during the third week of December lead to a monthly average of 51.68/MWh which was markedly higher than that of December 2006 (+11.96). In comparison to the previous month, the average price fell by 13.23/MWh. Overall, with an average of 37.99/MWh for the year, the spot prices for 2007 were clearly under the average for 2006 (-12.8). On the one hand. this is due to the low price levels for emissions trading, but it is also due to the absence of a hot summer and a cold winter. Power Futures Market: At the beginning of December, the delivery month of January was trading at its monthly low of 67.20/MWh. It reached 73.16/MWh, its high for the month, on December 10. The front month closed the last day of trading at 71.50/MWh (+6). This price increase is due to the high spot market price and the increases in the prices for primary energy, especially oil. The markets in the rest of Europe also showed a tendency toward higher power prices. As in the past few months, the highest power trading prices were to be found in Great Britain. The price development of British Cal08 contracts was strongly oriented on the development of the gas and oil prices, resulting in an increase of 3.81/MWh to 71.87/MWh. Compared to the 2006 close, the price increased by 27.2 %. Scandinavian prices were oriented on continental trading and also closed firmer. The Cal08 contract closed trading at 50/MWh, an increase of 18.4 % compared to the 2006 close. Fears of further supply bottlenecks drove the prices in France. In December, the French front year was up 4/MWh, closing the year at 65.88/MWh. That translates into a price increase of 18.7 % for the year. The German front year, on the other hand, ended at a level of 61.50/MWh. After it had initially simply moved sideways, it increased towards the end of the month to close up 2./MWh over the previous month. Compared to other European markets, Germany s price increase of 9,5 % was the smallest price increase for the year. 3

4 Base [EUR/MWh] Deutschland Frankreich Niederlande Skandinavien Großbritannien Jan. 05 Mrz. 05 Mai. 05 Jul. 05 Sep. 05 Nov. 05 Jan. 06 Power prices on the spot market Phelix Spot Base/Peak Mrz. 06 Mai. 06 Jul. 06 Sep. 06 Nov. 06 Jan. 07 Mrz. 07 Mai. 07 Jul. 07 Sep. 07 Nov. 07 Jan. 08 Trading date Quelle: European Energy Exchange (EEX) 1 1 Front-Month [EUR/MWh] Front-Month Base Phelix Spot Base Spot [EUR/MWh] Sep. 06 Okt. 06 Nov. 06 Dez. 06 Jan. 07 Feb. 07 Spot market vs. futures market: 12-month period 2006 / 2007 Phelix spot base / Front month base connection between short term market situation and long term expectations. Mrz. 07 Apr. 07 Trading date Mai. 07 Jun. 07 Jul. 07 Aug. 07 Sep. 07 Quelle: European Energy Exchange (EEX) 0 4

5 70 65 Cal08-Base Cal08-Peak Base [EUR/MWh] Peak [EUR/MWh] Power prices on the futures market: 12 month development 2006 / 2007 Front-year Cal08 Base / Peak Jan. 05 Mrz. 05 Mai. 05 Jul. 05 Sep. 05 Nov. 05 Jan. 06 Mrz. 06 Mai. 06 Jul. 06 Sep. 06 Nov. 06 Jan. 07 Mrz. 07 Mai. 07 Jul. 07 Sep. 07 Nov. 07 Jan. 08 Jun. 06 Jul. 06 Aug. 06 Sep. 06 Okt. 06 Nov. 06 Dez. 06 Jan. 07 Feb. 07 Mrz. 07 Apr. 07 Mai. 07 Jun. 07 Trading date Quelle: European Energy Exchange (EEX) Base [EUR/MWh] Deutschland Frankreich Niederlande Skandinavien Großbritannien Trading date Quelle: EEX, RWE Trading GmbH Development of power prices on European futures exchanges: annual development Front-year Cal06, Cal07 & Cal08 Base 5

6 Coal API#2-Swaps The coal markets continued to be quite volatile during December just as they had been in the previous month. The sell-off in the financial API#4 market at the end of November meant that the financial markets started into December on a weak note. In particular, it was the low freight rates that kept the prices for physical coal from rising further. However these prices were supported by the high FOB prices. As a result, the prices for financial API#2 contracts approached the prices for physical coal deliveries. At the start of the month there was still a spread of around $ 11/t between them. The API#2 Swap for the first quarter 2008 started the month of December at a monthly low of $ /t and reached its monthly high of $ /t around the middle of the month. As expected, trading in the week before Christmas and between Christmas and New Year s was lack lustre and the market had illiquid tendencies. The API#2 Swap closed the last month of 2007 at a fairly constant level of $ 125./t (+7.63). At $ 8.18/t ($ -0.47/t) there was a similar margin when compared to the previous month Price [USD/t] API#2 SWAP 1Q Trading date Quelle: RWE Trading GmbH Coal prices November/December Quarter 2008 API#2 SWAP 6

7 CO 2 Emissions Certificates EUA 08 contracts (Phase II) showed some, albeit small, movement. They started into December at 22.90/EUA and then climbed to a monthly high of 23.45/EUA. The subsequent sales pressure which came from a number of banks and funds lead to a drop in prices to under 22.50/EUA. In the further course of the month the emissions prices tended to move sideways. After they reached their low for the month at 21.90/EUA during the last days of the month, they closed the month and the year at 22.40/EUA (-0.05), thereby following the price developments of the 2008 calendar year. 24,0 23,5 EUA 08 EUA 08 [EUR/EUA] 23,0 22,5 22,0 21,5 21, CO 2 Emissions Certificates November/December 2007 EUA07 & EUA08 OTC Market Trading Date Quelle: RWE Trading GmbH 7

8 Glossary: API#2 API#4 APX ARA Backwardation Bpd Cif Clean Spread Contango Conversion factor Dark Spread ECX EEX Endex EUA EXAA Fob Front year, Y1 Front month, M1 Front quarter, Q1 ICE IPE LNG Location Spread MA NBP NYMEX One year spread OTC Phelix All Publications Index #2: Price index for coal delivery cif ARA All Publications Index #4: Price index for coal shipments fob Richards Bay Amsterdam Power Exchange Amsterdam, Rotterdam, Antwerp Higher notation of futures contracts with short terms over futures contracts with long terms Barrels per day Cost, Insurance, Freight of the named port of destination Spark Spread Emissions costs Higher notation of futures contracts with long terms over futures contracts with short terms 1 therm = kwh Spread between power and coal price European Climate Exchange European Energy Exchange European Energy Derivatives Exchange European Union Allowances (EUA) - state certified entitlement to emit a certain amount of greenhouse gases; 1 EUA = 1t CO2 Energy Exchange Austria Free On Board port of shipment One year contract with deliver to start at the beginning of the coming year from the point of view of the trading day One month contract with deliver to start at the beginning of the coming month from the point of view of the trading day One quarter contract with deliver to start at the beginning of the coming quarter from the point of view of the trading day Intercontinental Exchange International Petroleum Exchange Liquefied Natural Gas Spread between two trading locations Moving average National Balancing Point; virtual Hub in the UK New York Mercantile Exchange Spread between two one-year contracts Over-the-Counter Physical Electricity Index hourly weighted averages at the EEX spot market Phelix Base Hourly weighted averages per day for the hours Phelix Peak Hourly weighted averages for the hours 9-20 (8:00h 20:00h). Spark Spread Spread between power and gas price Spread Difference between two prices 8

9 Swap TTF WTI Enables the fixing or the indexing of the energy procurement prices. Swaps are transactions whereby a price for a certain period of time is converted to another price. It is purely a financial transaction. There is no physical delivery. Title Transfer Facility; virtual Hub in the Netherlands West Texas Intermediate RWE Trading GmbH Huyssenallee 2 D Essen Deutschland T +49 (0)201/12 09 (Switchboard) 9