The market reacted dramatically to a rise in gas prices. Q1 06 rose 18% December 25% an the day ahead 80%. There is a perception that there is not enough gas being imported to meet demand in the UK this has meant that players have taken ga out of storage. This should cause no real problems apart from the fact that if this level demand continues then we will run out of gas in storage. Moreover, cheap gas at the weekend normally pumped into storage, will rise to reflect demand, and overall there is a significant shift up across the curve for gas.

Power reacting to the gas prices, is also rising but inevitably because the clean spark spread versus the dark spread coal is rising in price too. Interestingly emissions are staying level, this reflects the fact that the marginal plant has been gas for so long, that the emissions market has priced in a all coal being used. Do not be surprised if it does rise a little to reflect European demand, but a large rise on the back of increasing gas prices, is less likely.

Finally, do not be fooled into thinking that if the market has risen this much in two weeks, it can also fall this much in two weeks, it can but the market is full of bulls, and bullish tendencies. Do not forget that Bears hibernate in the Winter.