There is a rumour that when the bulls are in town the Winters rise the most. The rumour is founded on some fact if one considers that bulls are buying when there is a shortage of supply and this is most likley to happen in the Winter when supply will not be able to meet demand.

Perhaps surprisingly the gap between Winter 06 and 07 is now at £8/MWh a ten fold increase from the beginning of the year when the gap was at £0.9MWh. The liquid Winter months are becoming of more interest to traders, but we are now approaching new highs in a season which has fundamentally shifted to reflect emissions already and so the fear that the price will double (like it did with Winter 2005) is unlikely unless fundamental fuel prices continue to double which again on a forward basis does not look likely.

So the natural shorts in the market (large industrial users) the way cope with the this market is to hedge a little early on, this at the very least protects an upwards shift. If the market looks soft, most have re-float options within their flexible deals, and a re-float may be the answer. There is no doubt that the market would benefit from buyers exercising their refloat options in the same manner that sellers front run and buy up the market.