Weirdly the market has risen this morning on the back of spark spread activity. Summer and Winter 07 have risen in the power market and marginally fallen in the gas market. Most players are looking to buy the spark spread as it is exceptionally cheap (some might argue fair value given where emissions prices are) but in reality they do look quite cheap.

A cheap spark spread will see players want to buy it and by this we mean buy power and sell gas. Interestingly though the mpower market is the first to react (as it is now almost exclusively traded by the incumbents as a spark spread anyway) so the power has risen and the gas fallen. The fall in gas has been very small and so the power price in order to react to the spark spread has had to rise. In reality in the long term we would expect to gas to fall dramtically (particularly in the Winter 07 but there is too much risk which has meant that many players are still reluctant to go short.)