As highlighted yesterday the gas market is responding very much like the power market, responding to short term demand by having to physically schedule supply to meet it. Put another way the ability to store power is minimal and this is happening more and more in the gas market. This explains why day ahead prices yesterday went to a high of £200/MWh, this is exceptional and in fact shortly afterwards this fell off significantly.

Late on yesterday afternoon it was clear that this fearsome rise, was perhaps a tad fear led and the market started the slow careful sell off. First to drop being June which had risen inexorably on the pull upwards from Apr 06. May still looks over priced, as traders tend to underestimate the fractional break in the curve between Apr and May 06. Winter 06 which has more bulls interested in it than a greek china shop also has responded rapidly but the fundamentals are not really there. It was hoped that the fear seen in 2005 was being eradicated, fear by its very nature is a phobia of the unknown, the fact that it happened last year suggests that the fear should be less this year because we can start to expect the unexpected.