German power: €50.46/MWh, up 1.86%
Coal: €98.03/t, up 0.71%
Natural gas: GB41.35p/therm, up 2.64%
EUAs for December 2010 delivery: €14.02/t, up 1.89%
CERs for December 2010 delivery: €11.82/t, up 1.55%
Brent crude oil futures for front-month 2010 delivery: US$77.16/bbl, down 0.6% as of GMT 09:00, July 30
WTI crude oil futures for front-month 2010 delivery: US$77.90/bbl, down 0.6%, as of GMT 09:00, July 30

Latest buzz

NYMEX crude for September delivery rose by 1.8% to settle at US$78.36/bbl yesterday, after hitting an intraday high of US$78.89/bbl, while ICE Brent crude climbed US$1.53 to finish the day at US$77.59/bbl. In both cases, the main driver was the strength of the Euro, which reached an 11-week high at over US$1.31 in early trading, on the back of more positive economic data from the Eurozone and a less than impressive US government report on unemployment.

Trading today will be overshadowed by the release of 2Q10 real GDP data for the US, which according to a Dow Jones survey, is estimated at 2.5%. Should it be any lower then crude is expected to come under significant pressure. Early Asian trading has already pushed both contracts lower due to reports that the Japanese unemployment rate has risen, while deflation continues and industrial output has dropped. A Bloomberg news survey has suggested that OPEC oil output has risen this month by 0.3% to average 29.4mbpd, 1.98mbpd above the cartel’s target. The amount of crude held in floating storage on board VLCCs has dropped by 73% over the course of this year to 11mbbl, as of July 29, according to ICAP Shipping International Ltd, as the shift towards backwardation has eliminated much of the incentive to hold oil in inventory. ExxonMobil, Royal Dutch Shell and oil service firm National Oilwell Varco have all reported strong earnings, despite the latter also reporting a 2.3% decline in revenue.

Some positive news has come from Germany, where unemployment has fallen for a 13^th successive month, to 3.21m, the lowest level seen since November 2008, according to the Federal Labor Agency.

According to the EIA, US natural gas production in May was essentially unchanged from the levels reported in April, totalling 64.92bnft³pd. Front month NYMEX natural gas traded yesterday in the US$4.79/mBtu range, before settling at US$4.83/mBtu (up 2.3%), thanks to the news that gas in storage rose by only 28bnft³ to 2919bnft³, down 3.1% on year, but up 8.9% above the five year average. The injection into storage was significantly below historical injections for the week.

Anglo American has reported that its thermal coal production for the first six months in South Africa for export had fallen by 6% as a result of heavy rain and geological issues. In contrast output at the Cerrejón mine in Colombia was unchanged from 2009 and its Australian thermal coal production has risen by 5%.

NTPC Ltd, the state-owned Indian power company is looking to import a record 14.5Mt of thermal coal for the year ending March 2012. The company will be importing the fuel directly for the first time, as opposed to previously obtaining imported coal through state-owned companies such as MMTC Ltd and the State Trading Corp of India. NTPC currently operates 15 coal-fired power plants and is planning to double its capacity to 75GW by 2017.

EUAs have been pushed up to above €14/t, on the back of a uniformly positive energy complex and a rise in the EU economic sentiment indicators to its highest level for two years. The index has been boosted from positive results from BASF, Siemens and Vattenfall. CERs also advanced but less than EUAs, causing the DEC10 CER-EUA spread to finish the day at -€2.20 and the DEC12 spread to end at -€3.27.

German power: €49.54/MWh, up 0.47%
Coal: €97.19/t, down 0.11%
Natural gas: GB40.28p/therm, up 1.47%
EUAs for December 2010 delivery: €13.76/t, up 0.29%
CERs for December 2010 delivery: €11.64/t, up 0.17%
Brent crude oil futures for front-month 2010 delivery: US$76.30/bbl, up 0.3% as of GMT 09:15, July 29
WTI crude oil futures for front-month 2010 delivery: US$77.24/bbl, up 0.4%, as of GMT 09:15, July 29

Latest buzz

Oil prices have rebounded after yesterday’s precipitous decline, sparked by a surprise 7.3mbbl build in US crude inventories for the previous week, reported by the EIA. This was partly driven by a 1.18mbpd increase in imports to 11.2mbpd, the highest level seen since the week ending August 25, 2006.

The news caused NYMEX crude for September delivery to fall to a one week low, settling down US¢51 to US$76.99/bbl. Today has seen a return to above US$77/bbl, as a result of a fall in the value in the dollar against the Euro, which is enjoying positive momentum as a result of a strong performance from its banking sector in stress tests reported on July 21. There remain concerns regarding the future outlook for oil demand, given that the Federal Reserve in its latest Beige Book Report said that US economic activity had risen only modestly in June. Further concerns were raised when an unexpected 1% drop in US durable goods orders and was reported on July 28. The Conference Board also reported that US consumer confidence has fallen to its lowest level in five months in July.

NYMEX natural gas for August delivery rose by 2.91% to settle at US$4.811/mBtu, while gas for September delivery rose 3.36% to US4.802/mBtu. The main impetus behind the rise in prices remains the high temperatures across most of the major gas-consuming regions, but support also came from traders buying back previously sold contracts in order to cover their positions ahead of the August contract expiration. In addition, the fact that the Atlantic storm season is expected to last through to September, is making it difficult to justify a sale off, despite its lack of impact to date.

Prompt coal cargo prices for European delivery and Richards Bay FOB dropped by around US¢50/t yesterday, with the latter trading at US$89.50/t, despite the news that heavy seasonal rains have significantly impacted on Indonesian coal output in South Kalimantan and affected ship loadings. If the situation continues for another week, it could potentially lead to delays or producers declaring force majeure. Some sellers of prompt South African cargoes are holding back to see how this state of affairs develops, while ample supplies at Australian ports are thought to be one of the main reasons why prices have yet to rise.

Over in China, the coal industry has been doing remarkably well. According to the National Development and Reform Commission, the sector generated a total profit of CNY122.5bn in the first five months of this year, up 80.9% YoY. Domestic coal production rose to 1.57bnt in the first half of 2010, up 20.1%, while imports rose to 81Mt over the same period up 70.6% YoY. In contrast, exports amounted to just 10Mt, down 13% YoY. Coal prices have risen since they hit a low of CNY680/t in late March, to around CNY765/t and the commission is expecting prices to be relatively stable in the second half of this year, partly due to initiatives designed to reduce pollution and emissions.

European carbon prices have risen, thanks to a mildly supportive energy complex with oil prices and the 2011 German baseload contract being the main factors. CERs recorded smaller gains, causing the DEC10 CER-EUA spread to widen to -€2.12/t and the DEC12 spread widening to -€3.20/t. Interestingly, four analysts polled by the Reuters news agency viewed current EUA prices as a reason to buy, given expectations of an European economic recovery and a tighter market for emissions allowances in Phase III of the EU ETS which begins in 2013.

German power: €49.31/MWh, down 0.06%
Coal: €97.34/t, down 0.15%
Natural gas: GB39.70p/therm, down 3.41%
EUAs for December 2010 delivery: €13.72/t, up 1.40%
CERs for December 2010 delivery: €11.62/t, up 0.43%
Brent crude oil futures for front-month 2010 delivery: US$76.28/bbl, up 0.2% as of GMT 08:45, July 28
WTI crude oil futures for front-month 2010 delivery: US$77.55/bbl, down 0.0%, as of GMT 08:45, July 28

Latest buzz

In stark contrast to Monday’s veritable buffet of positive economic news, oil prices were dragged down on Tuesday, thanks to a number of bearish signals. These included a 3.9 percentage point fall in the Conference Board’s Consumer Confidence to 50.4, from the 54.3 seen in June and a report from the Richmond Federal Reserve which indicated that there had been a drop in manufacturing activity. These outweighed the release of more strong company earnings data and a rise in US house prices. Adding to bearish sentiment was the news that the American Petroleum Institute has reported a surprise 3.1mbbl jump in US crude inventories for last week, compared to the 2.3mbbl draw down predicted in a Platts survey. As a consequence, US NYMEX crude settled yesterday at US$77.50/bbl, down US$1.48/bbl from the previous session.

Yesterday saw natural gas on the NYMEX rise for the second day in a row, as above average temperatures continued to boost demand for air conditioning and electricity. Natural gas for August delivery rose by 1.4% to settle at US$4.676/mBtu, while gas for September delivery rose by US¢6.3 to US$4.646. Today marks the expiry of the August contract. The National Weather Service has predicted that the hot weather across much of the US Midwest and East will remain over the August 1 to August 5 period.

Genscape has released its weekly status report on US coal inventories at power plants. Stockpiles have fallen by 1.6% and are currently down 16% on year. As a result, US power utilities have 55 days of coal burn on hand, as of July 26, two less than that seen in the previous week. Total inventories amounted to 152.5Mst, down from the 155.2Mst seen on July 19. Once again, the draw down in inventories has been attributed to the economic recovery and in the case of the weekly decline, the hot weather seen across much of the country.

Over in Europe, the carbon markets appear to have largely ignored fundamentals. Despite a slight drop in German Power and a large fall in the value of UK natural gas, DEC10 EUAs came off the lowest level for four months (€13.34/t), to settle at €13.72/t, up 1.40% on the previous session. Some support came from sentiment that the contract had been oversold as well as the news that the UK government will be putting pressure on the European Commission to increase the amount of auctioning taking place under the EU ETS. CER prices failed to continue their strong performance against EUAs, partly as a result of the shelving of plans to introduce cap and trade at the Federal level in the US. The DEC10 CER-EUA spread widened to -€2.10.

German power: €49.34/MWh, down 0.62%
Coal: €97.47/t, down 0.49%
Natural gas: GB41.10p/therm, down 2.02%
EUAs for December 2010 delivery: €13.53/t, down 3.43%
CERs for December 2010 delivery: €11.57/t, down 3.10%
Brent crude oil futures for front-month 2010 delivery: US$77.37/bbl, down 0.2% as of GMT 09:15, July 27
WTI crude oil futures for front-month 2010 delivery: US$78.90/bbl, down 0.2%, as of GMT 09:15, July 27

Latest buzz

NYMEX crude for September delivery settled yesterday at US$78.98/bbl, unchanged from the previous close. Support has come from expectations that US crude inventories may have fallen to a four year low, due to a combination of lower import volumes and lost production resulting from Tropical Storm Bonnie. A Bloomberg poll expects the EIA to report a 1.75mbbl draw down in crude inventories at 10:30 EDT tomorrow, which would put crude stockpiles at 351.75mbbl for the week ended July 23. According to the US Bureau of Ocean Energy Management, Regulation and Enforcement, 52% of US Gulf oil production capacity was shut in. The Gulf of Mexico is responsible for around 31% of US oil output.

Additional support has come from the stock markets, with the Dow Jones industrial average rising by 1% yesterday and increasing by 4% in the last three trading sessions. In addition, the Commerce department reported that new US home sales rose by 330,000 in June, higher than the 310,000 expected by analysts. Further support came from a good earnings performance from FedEx and sentiment may be boosted from the news of tighter Eurozone sanctions against Iran’s oil industry. One factor that is likely to be largely ignored by the markets is Venezuelan president Hugo Chavez’s threat of stopping oil supplies to America in the event of aggression from Colombia or any other US allies. Given that the US is by far the largest customer for Venezuelan oil and that such a move would ultimately be self-defeating, it can only be interpreted as empty sabre-rattling.

Views from analysts regarding the current direction of the market are decidedly mixed. Ritterbusch and Associates have commented that: “Oil fundamentals are looking more bearish with each successive EIA report,” while Goldman Sachs have argued that crude prices are significantly below the level warranted by fundamentals.

In addition to the EIA’s “This Week in Petroleum,” traders will be looking towards the release of the US July Consumer Confidence index later today and an advance report on durable goods tomorrow.

Over in Australia, queues at the port of Newcastle, rose by one to 12, up from the 11 seen a week earlier. Coal shipments rose by 1.2% to 2.18Mt, according to Newcastle Port Corp. Its report also stated that the wait time had fallen to an average of 7.46 days down from the 9.84 seen last week. Thermal coal prices at the port have fallen by 1.3% according to the globalCOAL NEWC Index, to US$95.05/st in the week ended July 23.

Traders witnessed a generally negative performance from the European energy complex on July 26, with only Brent Crude recording mild gains. Declines in the 2011 German baseload power contract, combined with less expensive natural gas, caused DEC10 EUAs to shed 3.43%, ending the day at €13.53/t. CERs also declined, but less so than EUAs, as was the case in the previous session. As a result, the DEC10 CER-EUA spread narrowed to -€1.96, the first time it has dropped below -€2.00 on the close this year. The DEC12 spread finished at -€3.03. No CERS were issued last week, while the previous week had seen only 136,000 CERs released.

German power: €49.65/MWh, down 1.10 per cent
Coal: €97.94/t, up 0.03 per cent
Natural gas: GB41.95p/therm, up 0.60 per cent
EUAs for December 2010 delivery: €14.01/t, down 1.68 per cent
CERs for December 2010 delivery: €11.94/t, down 1.40 per cent
Brent crude oil futures for front-month 2010 delivery: US$77.17/bbl, down 0.4 per cent as of GMT 09:15, July 26
WTI crude oil futures for front-month 2010 delivery: US$78.65/bbl, down 0.5 per cent, as of GMT 09:15, July 26

Latest buzz

NYMEX crude for September delivery gave up US¢32 on Friday to settle at US$78.98/bbl, after earlier hitting US$79.60/bbl, the highest intraday price seen since May 6, while ICE Brent crude rose by US¢21 to US$77.66/bbl. Today has already seen NYMEX crude flirt with US$79, during early morning trading, but appears to have lost some momentum. Impetus has come from a combination of strong US earnings data and good macroeconomic data from Europe. In addition, the MSCI Asia Pacific Index has reached a one month high. This appears to be effectively insulating the market from suspicions that the recent stress test on EU banks was not sufficiently demanding. Only seven out of 91 banks tested failed with a combined capital shortfall of €3.5bn ($4.5bn). Some support has been lost thanks to the dissipation of Tropical Storm Bonnie over the weekend, which failed to significantly damage any oil installations in the Gulf of Mexico. The storm forced companies to shut in 50 per cent of the region’s crude oil production capacity. US GDP is expected to have grown at an annual rate of 2.5% in 2Q10, down from the 2.7% seen in 1Q10, according to a Bloomberg poll. Japanese crude oil imports rose slightly in June on year, but have been static for the first half of 2010.

According to Qatar’s deputy prime minister, HE Abdullah bin Hamad al-Attiyah, it is unclear as to how OPEC will respond to the current oil price environment given the volatility in the market. The next meeting of OPEC members is scheduled to take place in Vienna on October 14. The tanker tracker Oil Movements has issued a report that has predicted that the cartel’s oil exports (excluding Angola and Ecuador) are expected to fall by 200,000bpd in the four weeks to August 7, to 23.55mbpd.

Wood Mackenzie Consultants Ltd, in a report entitled “Race for supply – The Future of China’s Gas Market” have predicted that the country will be demanding 46Mt of LNG in 2020, compared to the 31Mt estimated for year-end 2009. It also expects China’s natural gas demand to rise to 43bnft³pd (444bnm³pa) in 2030 from the 9bnft³pa seen in 2009. The company expects a significant proportion of this growth to stem from a drive to reduce the use of oil products in the industrial and residential sectors. It also envisages that “beyond 2020, we expect to see significant volumes of indigenous unconventional gas entering the market and meeting much of China’s incremental demand…” Wood Mackenzie also predicts that unconventional gas production could exceed 11bnft³pd by 2030, equivalent to over 25 per cent of the country’s gas supply.

Given this expected development, “There is a clear imperative for LNG sellers to conclude deals with Chinese buyers in the next two to three years, or risk seeing China disappear as a potential foundation buyer for their projects,” Wood Mackenzie says.

Friday saw EUA and CER slide back, courtesy of a decline in the 2011 German baseload power contract and Brent crude, despite rising natural gas and coal prices. The marked rise seen in the previous session, also created an incentive for profit taking, further dragging down carbon prices. The DEC10 CER-EUA spread spent much of the session hovering between -€2.00 and -€2.20, before suddenly narrowing to -€1.90. It finished the day’s trading at -€2.07.

German power: €50.20/MWh, up 1.52 per cent
Coal: €97.92/t, up 0.88 per cent
Natural gas: GB41.70p/therm, up 5.53 per cent
EUAs for December 2010 delivery: €14.25/t, up 2.22 per cent
CERs for December 2010 delivery: €12.11/t, up 2.02 per cent
Brent crude oil futures for front-month 2010 delivery: US$77.50/bbl, down 0.4 per cent as of GMT 10:30, July 23
WTI crude oil futures for front-month 2010 delivery: US$78.99/bbl, down 0.3 per cent, as of GMT 10:30, July 23

Latest buzz

A strong performance from US stocks, after better than expected earnings from Ebay Inc and Caterpillar Inc pushed front-month NYMEX crude up 3.6% to close at US$79.30/bbl, the highest settlement price seen since May 5. The Dow Jones Index rose by 2.2% to 10347. Also providing some support was the formation of tropical storm Bonnie, south of the Bahamas, which is now on course to travel across Florida and into the Gulf of Mexico, according to the US National Hurricane Center.  However, sentiment among analysts appears to still be somewhat bearish. In a survey of 34 analysts, 38 per cent predicted that crude prices will fall through July 30, with only 10 per cent predicting an increase. This is roughly comparable to results of a previous study conducted last week. The storm has caused teams working on containing the oil spill in the Gulf of Mexico to evacuate the area. Prices have since dropped significantly, possibly as a result of profit-taking.

US natural gas inventories rose by 51bnft³ to 2.891tnft³ for the week ended July 16, according to an EIA report. As a result, inventories are down 1.8% YoY, but are 9.9% above the five-year average of 2.63tnft³. The stockbuild was well within the 49-53bnft³ predicted by a Platts survey.

Arvind Mahajan, executive director at KPMG advisory Services Pvt, warned yesterday that India is on course for a domestic coal demand/supply gap of 189Mta by 2015, equivalent to around 50% of the power sector’s projected demand, which would necessitate a doubling of coal imports. He expects utilities to add 75GW of generating capacity, which would require an additional 375Mta of coal. However, Mr Mahajan made the point that “Indian companies have an advantage in that they’re looking for lower-quality coal, which other importers in Japan, South Korea and Europe with older plants can’t use.” He also predicts that India could increase its domestic coal production by up to 80Mta via the use of better machinery and by developing currently untapped coal resources.

Analysts at Deutsche Bank have predicted that South African Richards Bay FOB coal prices (API4) could drop by US$10/t in 3Q10, due to slower economic growth in China, in a report published yesterday.

“While we remain bullish on the thermal coal market in the longer-term, over the next quarter we see demand conditions deteriorating sufficiently to threaten a modest correction in pricing,” the report said. “Industrial production is likely to continue to decelerate, potentially surprising on the downside,” Deutsche said. According to suppliers active in the Asian market, buying from Chinese companies has declined in the past month.

Over in Europe, EUAs managed to stage something of a rebound, helped by a buoyant energy complex. Strong support came from a 1.52% increase in the value of the 2011 German baseload power contract, along with a 5.53% rise in the value of UK natural gas, which is likely to promote greater use of coal and therefore greater demand for carbon allowances. CER prices also recorded gains, but on small volumes. The DEC10 CER-EUA spread finished at -€2.14, while the DEC12 spread ended yesterday at -€3.25.

German power: €49.45/MWh, down 0.92 per cent
Coal: €98.01/t, down 0.80 per cent
Natural gas: GB39.52p/therm, down 5.35 per cent
EUAs for December 2010 delivery: €13.94/t, down 2.04 per cent
CERs for December 2010 delivery: €11.87/t, down 1.66 per cent
Brent crude oil futures for front-month 2010 delivery: US$75.61/bbl, up 0.3 per cent as of GMT 10:15, July 22
WTI crude oil futures for front-month 2010 delivery: US$76.93/bbl, up 0.3 per cent, as of GMT 10:15, July 22

Latest buzz

Wednesday saw NYMEX front-month crude futures surge to a three-week high of US$78.61/bbl on the back of new data indicating rising Chinese energy demand. However, a combination of gloomy market sentiment sparked by a testimony given by the Federal Reserve chairman, Ben Bernanke and a surprise rise in oil inventories removed support, causing the contract to close at US$76.52/bbl. China’s oil consumption hit a new record in June and is up 10% on year. The EIA reported an increase of 400,000bbl for the previous week, running counter to analysts’ expectations of a 1.6mbbl stockdraw. Gasoline and distillate inventories also rose. The Dow Jones Industrial average fell by 1.0% after Mr Bernanke’s warned that the economic recovery underway in the US is still fragile.

Natural gas futures declined on the back of bearish expectations that the EIA will today report a 51bnft³ injection into storage for the week ended July 16, according to a Bloomberg poll. NYMEX gas for August delivery fell by US¢7.7 to settle at US$4.513/mBtu. Last week, the EIA reported a 78bnft³ increase in natural gas inventories, which put stockpiles at 10.7% above the five-year average.

Over in South Africa, workers have ended a strike at the Richards Bay coal terminal, after the South Africa Transport and Allied Workers’ Union accepted the company’s original offer of a 9.5% increase in wages, compared to the 4.6% rate of annual consumer price inflation seen in May. According to the company, terminal operations were unaffected by the strike. Coal for delivery into Europe and FOB Richards Bay price fell by US¢75 yesterday due to limited activity from market participants. Many are holding off until end-user buying resumes in September and there are concerns that rising hydropower output in China will undermine Chinese demand for coal, further softening prices on the international market. An August-loading South African cargo was bid at US$86.00/t and offered at U$89.00.

EUAs and CERS recorded further losses yesterday, primarily in response to an near 1% drop in the value of the 2011 German baseload contract and the fall in UK natural gas prices to below GB40p/therm. The German government’s auction of 750,000 EUAs cleared at €13.94 in the afternoon. CER prices benefited from some support, thanks to the news that the UNFCCC is considering contingency plans for the Clean Development Mechanism if a successor to the Kyoto Protocol, which expires in 2012, fails to materialise. The plans include potentially extending existing caps into 2013 and 2014. The CDM board is also soon to examine 24 projects currently under formal review. These have the potential to generate over 20m CERs by 2013.

German power: €49.91/MWh, down 1.87 per cent
Coal: €97.72/t, down 1.14 per cent
Natural gas: GB41.75p/therm, down 7.02 per cent
EUAs for December 2010 delivery: €14.23/t, down 2.27 per cent
CERs for December 2010 delivery: €12.07/t, down 2.19 per cent
Brent crude oil futures for front-month 2010 delivery: US$76.69/bbl, up 1.5 per cent as of GMT 10:00, July 21
WTI crude oil futures for front-month 2010 delivery: US$78.08/bbl, up 1.8  per cent, as of GMT 10:00, July 21

Latest buzz

NYMEX crude for September delivery rose US¢68 to settle on Tuesday at US$77.58/bbl, on the back of a 0.7 per cent rise in the Dow Jones industrial average and a 1.1 per cent increase in the S&P 500 on strong 2Q10 earnings. This effectively dissipated the bearish sentiment created by a report from the Commerce Department which included the news that new housing starts fell by five per cent in June to 549,000.

A report released by the American Petroleum Institute later that day indicated that US crude inventories fell by 241,000bbl in the previous week, compared to the 1.6mbbl expected by analysts surveyed by Platts. The EIA is due to release its more authoritative “This Week in Petroleum” report later today.

Additional impetus is coming from a weather system over Puerto Rico and the Dominican Republic, which the National Hurricane Center has warned, has a 60 per cent chance of developing into the second named tropical cyclone of the Atlantic Hurricane season.

Genscape has reported that US power plant coal inventories fell by 2.1 per cent this week. As of Monday, power utilities had 155.2Mst of coal on hand, equivalent to 57 days of coal burn, compared to the 158.5Mst seen on July 12 and down from the 180.1Mst seen in the same week last year.

China Coal Energy’s crude coal production rose by 29.6 per cent YoY in the first half of this year to 62.26Mt, while its exports and imports increased by 24.1 per cent and 154.8 per cent, to 720,000t and 1.07Mt respectively. Crude coal output in June was up 5.4 per cent YoY at 10.3Mt.

Over in Europe, “The European Commission has approved a proposal for a Council Regulation on State aid to facilitate the closure of loss-making hard coal mines in the EU by 15 October 2014,” according to a statement made by the EU executive. The current funding regime, which allows state aid for the coal industry is set to expire this year.

EUAs experienced a steady decline over the course of yesterday’s trading, due to the marked drop-off in German power prices and UK natural gas. Although the latter recorded a seven per cent fall in the value of its front-month contract, it was the nearly two per cent decline in 2011 German power prices that caught traders attention, given fears that it could be partly due to reduced demand. The DEC10 CER-EUA spread stayed in a narrow range and eventually finished the day at -€2.16. The DEC12 CER-EUA spread also tightened, finishing at -€3.31.

German power: €50.86/MWh, down 0.78 per cent
Coal: €98.85/t, up 0.05 per cent
Natural gas: GB44.90p/therm, down 0.59 per cent
EUAs for December 2010 delivery: €14.56/t, up 2.10 per cent
CERs for December 2010 delivery: €12.34/t, up 2.07 per cent
Brent crude oil futures for front-month 2010 delivery: US$75.27/bbl, down 0.5 per cent as of GMT 10:00, July 20
WTI crude oil futures for front-month 2010 delivery: US$75.96/bbl, down 0.4 per cent, as of GMT 10:00, July 20

Latest buzz

NYMEX crude for August delivery settled yesterday at US$76.54/bbl, up US¢53 from the previous session and a reversal from the US¢61 loss seen on Friday. It reached an intraday high of US$77.73/bbl but was unable to find support at that level. Bullish sentiment was prompted by Halliburton Co, reporting an 83 per cent increase in its 2Q10 earnings and earning per share higher than that predicted by analysts. Hasbro and Delta Air Lines also reported better than expected operating profits. Gains were essentially capped by news that the National Association of Home Builders/Wells Fargo housing market index fell to 14 in July from a downwardly revised 16 in June. The Dow Jones Industrial Average rose by 0.6 per cent yesterday.

US natural gas for August delivery on the NYMEX settled down a cent at US$4.51/mBtu, after earlier trading at an intraday high of US$4.55/mBtu. According to Baker Hughes, the number of rigs drilling in the US for natural gas rose by 15 to 979 last week, the highest reported level since February 20, 2009. According to the EIA, national natural gas production will average 61.26bnft³pd in 2010, up 2.1 per cent from 2009. According to Genscape, US power plant output rose by 2.6 per cent last week to 88.6TWh. General expectations are for the commodity to remain essentially range-bound, with a limited downside courtesy of forecasts for above average temperatures over most of the country for the July 24-28 period.

Over in South Africa, the strike by the SA Transport and Allied Workers’ Union (SATAWU) at the Richards Bay Coal Terminal has entered its second week. According to a spokeswoman for the terminal, “operations are normal”, despite 80-100 workers being on strike, while SATAWU puts the number at closer to 266 of the 520 strong workforce. The main bone of contention is allegedly management attempts to negotiation pay increases for 2011 and 2012 now. Workers at the terminal have already accepted a 9.5 per cent pay rise for this year. A Richards Bay cargo traded at US$91/t FOB yesterday, down US$1.00 from Friday. Traders are expecting little movement until Germany’s utilities or other absent buyers re-enter the market. In the meantime, China, India and South Korea are buying steadily. Four South Korean utilities purchased 970,000t of coal from Australia, Canada and Russia via a joint tender, which closed on July 6 at US$104.50/t CIF.

Spot thermal coal prices at China’s biggest coal port Qinhuangdao have remained unchanged from the previous week and yet to move significantly since the start of June, due to a healthy demand/supply balance and slower power consumption growth. The country generated 11.4 per cent more electricity in June on year, the slowest growth in a non-holiday month seen since October 2009. Thermal power output rose by 8.6 per cent, compared to 18.5 growth in hydropower production. Coal inventories at the port rose by two per cent on week to 5.9Mt by July 19.

EUAs booked gains on Monday, with traders attributing the rise to a stronger energy complex, despite falls in the value of the 2011 German Baseload contract and UK natural gas. CER prices performed similarly. The DEC10 contract received the lowest level of interest, while the DEC12 contract saw the most activity, almost 50 per cent of the total daily trading volume for CERs. The DEC10 and DEC12 CER-EUA spreads narrowed slightly to -€2.22 and -€3.38, respectively.

German power: €51.26/MWh, up 0.37 per cent
Coal: €98.80/t, up 0.09 per cent
Natural gas: GB45.17p/therm, down 3.01 per cent
EUAs for December 2010 delivery: €14.26/t, up 2.22 per cent
CERs for December 2010 delivery: €12.09/t, up 2.02 per cent
Brent crude oil futures for front-month 2010 delivery: US$75.27/bbl, down 0.5 per cent as of GMT 10:00, July 19
WTI crude oil futures for front-month 2010 delivery: US$75.96/bbl, down 0.4 per cent, as of GMT 10:00, July 19

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Oil prices dipped slightly on July 16, giving up almost one per cent as a result of a poor performance from US equities, triggered by a bearish consumer confidence report and disappointing 2Q10 results from Bank of America and General Electric. NYMEX crude finished Friday at US$76.01/bbl, down 0.1 per cent from the previous week and in marked contrast to the 5.5 per cent gain recorded in the previous week. The University of Michigan’s preliminary index of consumer sentiment fell to 66.6 from 76 in June.

As of writing, US crude has slipped below US$76/bbl, suggesting that oil traders are continuing to factor in the 2.5 per cent drop in the value of the Dow Jones Index and that the underlying economic pessimism is starting to erode the support generated by the strong crude inventory reports issued by the EIA over the past few weeks.

Despite the current price environment, Barclays Capital is still holding to its forecast of NYMEX crude averaging US$84/bbl in 3Q10, and US$87/bbl in 4Q10, saying in a note to clients that these prediction are “befitting the current and future oil market fundamentals.”

According to an Iranian official, Iran is considering seeking payment for its oil exports to Europe in UAE dirhams instead of euros to avoid the impact of possible tighter trading sanctions. Such a move would be intensely uncomfortable for the UAE, which is a major US ally, despite the fact that Iran is one of its largest trading partners. The news has been greeted with disbelief from some analysts, given that the currency is pegged to the US dollar and is not traded in the same way in the international markets. However, it is thought that the proposal might be a response to current efforts by the UAE to tighten trade restrictions with Iran. If Iran started to hold more dirhams, it could potentially alter the balance of power between the two countries.

BP has suffered a fresh set-back given news that oil is seeping from a location some distance from its capped Deepwater Horizon well. BP is looking to convert the cap to allow a riser to be connected to the well, which would allow oil to be collected by ships, which could mean another three days of uncontrolled release into the Gulf of Mexico, according to BP’s chief operating officer Doug Suttles, during an early morning news conference on Sunday.

NYMEX natural gas drifted down US¢7 to close at US$4.52/mBtu on Friday, partly as a result of profit taking following Thursday’s seven per cent surge, but also as result of a stronger US dollar and expectations of higher domestic production, given that data from Baker Hughes Inc indicated that the natural gas rig count has risen to its highest level in over a year.

According to Genscape, US coal consumption rose by three per cent over the course of the week ended July 15, and is up 17 per cent on year. In the east of the country, use was up two per cent from the previous week and 21 per cent on year, while the west which has fewer coal-fired power plants saw coal consumption rise by nine per cent from the previous week and up 12 per cent on year. The rise in coal usage is partly attributed to an unusually high number of nuclear power plant outages for maintenance, a large proportion of which are unplanned.

EUA prices managed to mount a recovery on Friday, after a slow start to trading, due to a rise in the value of 2011 German power contracts, which offset the impact of weaker natural gas prices. Bullish sentiment drove the 2010 contract to touch €14.40/t in the last hour of trading, but were unable to find enough support, causing the contract to finish the day lower at €14.26/t. CER prices performed less strongly, possibly due to the current outlook for US climate legislation. Senator Harry Reid is expected to reveal an energy and climate bill this week, but it is not known as to whether it will feature cap and trade. Meanwhile, Senators John Kerry and Joe Lieberman are working on a smaller version of their earlier bill, which will focus exclusively on emissions from utilities. The DEC10 CER-EUA spread finished the day at -€2.17, while the DEC12 spread was wider at -€3.29.