Winter 07 traded this afternoon at £40/MWh. If we assume that the Q1 08 has €16 worth of carbon priced in then we can also assume that the some of the uplift is justifiable. But perhaps the main reason why Winter 07 is as high as it is is that many sellers have a differing fundamental view to most in that they believe that the premium for selling forward should be higher than it currently is. It is fair to say that around £40 some of the buyers turn sellers and try and push the market down, and so there is a reasonable lid but when the market gets to £38 the natrural sellers dry up and the buyers push the market back up again.

This rangebound trading whilts boring shows that fundamentally the buyers and the sellers are a little bit apart and it is only when their views grow stronger that they will start to definitively define which way the market will go. Clearly at £40 unless something extraordinary happens there are more sellers than buyers.