ENERGY MARKET CALL    FRIDAY 18th MAY

Investors continued to sell risk assets yesterday as concerns over the Eurozone and poor economic figures caused the markets to remain nervous. Spain’s bond auction succeeded, but at a cost of over 5% yield. Philadelphia Fed business confidence fell to its first below-zero reading since September, which caused a sharp sell-off in Brent: it closed at 106.85, down $2. The Euro touched a four-month low against the dollar.  The European holiday  suppressed activity in the energy markets, but sharply lower gas and coal prices moved power curves down. EUA Dec 12 closed in a range 6.55 – 6.70, closing on its lows.

Moody’s have cut the debt and deposit ratings of 16 Spanish banks, including Santander, and markets are looking weak this morning. Power, gas and coal are down, Cal 13 ARA coal trading at $100.00,  Brent crude below $107.  Dec 12 EUA has recovered from its low this morning of 6.36, and is currently trading at 6.45. The Dec 12 CER/EUA swap is at -2.90.  There are no significant economic data due today, and the lack of panic selling in stocks and commodities suggests that the sellers are beginning to slow down, which should result in some price stability and recovery. The market remains vulnerable to bad news from the Eurozone, however, and is still looking for some political action and economic certainty. Spanish ten-year yields are still at 6.30, while the Bund yield is a record low of 1.4%.