When crude oil prices broke through $100bbl at the start of the month, the impact was felt on quarterly and seasonal UK Power contracts with Winter 11 recording a gain of £1.25/MWh over four days in the first week of February. The impact was more noticeable on gas prices though resulting in a pronounced squeeze on Spark Spread contracts. The UK power market did retrace its steps in the week ending 11 February though as bearish sentiment returned following fuel market moves. Discussion focused on the clean spark spreads for Summer 11 which fell to their lowest ever level on record during February with dark spreads for the same period trading at a premium. Traditionally clean spark spreads have been at a premium during summer months with demand for gas tending towards low levels resulting in a cheaper fuel source for generation. The switch suggests the market will see gas plants running as the marginal plants this summer. A resurgence of Middle East unrest during the third week of February saw a volatile oil market feeding through into NBP gas and consequently UK Power prices. Towards the end of the month crude oil prices hit $199bbl at one point. The prompt power curve resisted the bullish sentiment though helped by healthy LNG supplies. With a political risk premium being priced into oil contracts and feeding through into NBP and power prices, the UK Power market yet again bemoaned the fact that power contracts are so closely linked to the NBP failing to trade on their own fundamentals. Some resistance was felt towards the end of the month as the market took stock and recognised that the market was being driven by sentiments and not fundamentals. Players were keen to get themselves into positions that would allow them to respond quickly to any changes to the Middle East situation. The most significant gains during the month were seen in the Winter 11 contract for power which closed the month at £54.10/MWh, up by £2.85 and Winter 12 up £2.1 at £55/MWh. A similar story was seen in gas with Winter 11 closing the month 5.05p/therm up from where it started finishing at 64.65p/therm. Clean Spark Spreads were squeezed across the board.