European energy prices for the coming month fell on expectations this week's cold snap may abate by the end of January, prompting traders to sell contracts in advance.
Natural gas for delivery in February in the UK, Europe's biggest market, fell to a record 28.1 pence a term, according to a contract traded on the ICE Futures exchange. German power for month-ahead delivery fell as much as 6.7% to €44.75 ($58.34) a megawatt-hour, according to prices from the broker GFI Group Inc. on Bloomberg.
That's the lowest since the contract began trading with GFI on October 3. „Traders are looking to sell forward contracts,” Dieter Hluchy, a power trader at Enercity Trade, a unit of Stadtwerke Hannover AG in Germany, said yesterday by telephone. The market isn't expecting a prolonged spell of cold weather, so „nobody is thinking prices will increase,” he said. Minimum temperatures in Berlin may rise to 3 degrees Celsius by January 29 from -6 yesterday, MC-Wetter said today on its Web site, Wetter24.
Milder-than-average weather in the heating season started October 1 in northwest Europe has reduced demand for electricity and gas, causing prices to fall. German electricity delivered on working days so far this winter has averaged about €46 a megawatt hour, compared with about €65 a megawatt hour over the same period the previous year, according to GFI. In the UK, more gas than usual is being held in storage.
As of Monday, the UK's largest storage site, Centrica Plc's Rough, contained 30,806 gigawatt hours (2,930 million cubic meters) of gas compared with 25,764 gigawatt hours this time last year. A muted response to the current cold snap added to pressure on prices. Germany's European Energy Exchange AG produced a price of €44.03 a megawatt hour in its daily auction for power delivered the following day, a fall of 16%. Natural gas for next-day delivery in the UK gained 2% to 31 pence per term.
Demand is forecast to reach 419 million cubic meters in the 24 hours starting 6 a.m. today, the highest since February 2005, figures from the Web site of UK network manager National Grid Plc show. On the same day last year, day-ahead gas traded above 90 pence on a forecast demand of about 380 million cubic meters. European Union carbon dioxide emission allowances for delivery in 2007 fell 2.6% to €3.80 a metric ton on the European Climate Exchange in Amsterdam, in line with lower natural-gas costs for power generators. (Bloomberg)