Oil fell to just below $60 a barrell yesterday and traded maginally up today on rumours that Opec may cut production. There is a feeling that the oil market has $60 as a technical level and that further falls will come if production is not cut. That having been said the hurricane season has been mild and players particularly the US are long stocks and so the cut in production may tie in with a fall in demand. This would not see the price rise back up again, and would suggest that we are in for another bearish bout of commodities selling.

Most commentators have suggested that oil is naturally placed between $40 and $60 and so we would expect if demand remains low (which is likely given a predicted mild European Winter) that the oil price will eventually continues it trickle to $50 a barrell. This could see gas prices fall and would be further pressure on the spark and dark relationship with a switch in the marginal generation type, pushing emissions prices down as the coal generators dump allowances as they switch off.

So £36.80 for Summer 07 looks good but if the mild weather continues and the abundance of supply remains expect it to fall further.