UK: 2012 contracts shrug off the bulls; spark narrows
The 2012 seasonal contracts continued their downward momentum on Wednesday, shrugging off a bullish session on spot and near-term contracts.
Summer '12 and Winter '12 Baseload both recorded a £0.30/MWh loss, closing at £38.70/MWh and £45.20/MWh respectively.
Traders who had previously said that power would wait to see which direction gas moved in were vindicated in the case of the Winter contract, which softened in tandem with the corresponding NBP contract.
However, in the case of the Summer, the assertion that gas would take the lead was proved groundless, as power shrugged off a firming of the NBP contract.
This resulted in a narrowing of the Summer '12 unadjusted spark spread from £11.12/MWh at Monday's close to £10.71/MWh at Tuesday's close.
"The power curve softened due to a lack of trade out there - pure and simple," one source said. "If someone had a position to settle that far out, they'd look to sell - otherwise, sentiment is going to be soft." Only one deal was recorded on Summer 12 Baseload through the session, traders said.
The front two seasonal contracts, however, found support via the spot. This buoyed Summer '10 Baseload, with delivery of the contract nearing, which, in turn, fed through to Winter '10 Baseload, traders said.
"The front contracts are definitely finding some short-term support," one source offered.
The front three seasons were also buoyed by the fuel spectrum, with both the gas and coal curves recording gains out to Summer '11, while modest losses on the carbon market had minimal effect, traders said.
Spot trading was spurred, as wintry conditions returned to the UK, seemingly oblivious to the official start of British summertime last weekend. National Grid data showed a pronounced reduction in average temperatures over the past four days.
Day-ahead Baseload quickly rose from its opening £34.25/MWh valuation to £34.50/MWh, traders said, where it shifted some volume through the morning, before a brief flurry of deals in the afternoon raised the closing assessment to £34.75/MWh.
But traders anticipated a return to somewhat more bearish spot sentiment on Wednesday. "£33.75/MWh would be a fair bet on Day-ahead for the rest of the week," one source said. "I don't anticipate there being much room in either direction."
Day-ahead demand was forecast to peak at 46.5GW by National Grid, with a comfortable minimum supply margin of 12.7GW.
Average demand for the four-day weekend was put at just 38.4GW, with a very comfortable 13.9GW average surplus. JS
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