Energy Commodities: 03/06/10

Unless otherwise stated, all prices are for the close of June 2.

German power: €51.67/MWh, up 0.86 per cent
Coal: €96.87/t, up 0.37 per cent
Natural gas: GB37.32p/therm, up 1.65 per cent
EUAs for December 2010 delivery: €15.27/t, up 0.86 per cent
CERs for December 2010 delivery: €12.54/t, up 0.80 per cent

Brent crude oil futures for front-month 2010 delivery: US$74.85/bbl, up 1.5 per cent as of GMT 09:00, June 3
WTI crude oil futures for front-month 2010 delivery: US$74.07.bbl, up 0.8 per cent, as of GMT 09:00, June 3

Latest buzz

Crude oil has received a considerable amount of support from positive US housing data, coupled with double-digit automobile sales growth, a weaker US dollar and a report from the American Petroleum Institute that American crude inventories fell by 1.4mbbl over the last week. Traders are now awaiting confirmation of this decline from the EIA, which will release its “This week in petroleum” report today at 10:30 EDT. Some additional strength has come from better performance from Asian equities. In addition, the Memorial Day holiday marks the start of the US summer driving season, which should help to bring crude and gasoline inventories down.

Oil is expected to remain relatively range-bound until Europe’s debt crisis and the underlying structural problems are resolved. However, given that this could potentially mean the exit of the weakest performers such as Greece, there is a strong possibility that the economic outlook may deteriorate before it gets better.

NYMEX crude for front-month delivery settled US$73.80/bbl, up US$1.22 on the previous trading session, but down from an intraday high of US$73.93/bbl.

US natural gas futures also finished up higher, rising by 4.12 per cent to close at US$4.423/mBtu. On the back of the forecasted active hurricane season and the prospects of hotter temperatures. However, future gains are expected to be limited, given the comfortable level of gas in storage. The EIA is expected to report that 93bnft³ of gas was injected during the last week, according to a poll of analysts conducted by the Dow Jones news agency.

Meanwhile, things are looking bullish for the international thermal coal market. According to the Central China Power Grid, the region is expected to experience a daily average shortage of over 90,000t, up 17 per cent YoY, on the back of stronger power demand. In addition, Deutsche Bank is predicting greater demand from China and India to push thermal coal contracts up by 26 per cent by 2012 to US$120/t. The investment bank said in a report that it expects the “very supportive” fundamentals to continue into 2011 and 2012.

In the carbon markets, both EUAs and CERS edged up slightly on Wednesday. EUAs experienced weak trading volumes, while the trade in CERs was at the highest seen since May 28. The gains were in line with those recorded by German power. The DEC10 CER-EUA spread finished the day at -€2.73.