The market took more of a bearish outlook yesterday. This is not surprising if one considers how aggressive the buying during June and July was. No one suspects that prices will return to the lows of £20-£30/MWh mainly because fundamentals have changed, with the introduction of carbon emissions, and tighter margins in gas. There will always be the possibility of spikes upwards and this means selling into record lows will be done in extremis. The market is developing trends which appear to be classic contango with the prompt permanently bearish, and the back end of the curve permanently bullish. This is being caused by an over reliance on risk limits, as prices are forced upwards players are forced to buy, and the market swings wildly on the back of it. In reality, many players will not be looking seriously at hedging positions out as far as 2008 and so perhaps buying aggressively now could reap big rewards. But fundamentals change and with three years in which to do so, it is also a risk to hedge this far out.