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Last updated: November 29, 2010 11:06 pm
Crude oil, European natural gas and power prices rose sharply as freezing temperatures engulfed most of western Europe, pushing up demand in the UK, Germany and France, traders and analysts said.
Meteorologists said the cold weather was set to continue in the near term with temperatures likely to dip Tuesday to as low as minus 5 degrees Celsius in Paris.
“A high pressure ridge over Greenland is redirecting polar air into Europe, and the situation is unlikely to change for several days,” said Matt Rogers, meteorologist with the Commodity Weather Group, a US-based consultancy.
But Mr Rogers, speaking for many in the oil, natural gas and power markets, cautioned against extrapolating the freezing temperatures in Europe – and their potential for higher energy demand – as the outlook for the winter, which officially starts on Wednesday.
“A week of cold weather in November does not tell us anything about the rest of the season,” he said.
But traders said the freezing temperatures were having a noticeable, even if short-term, impact on European demand for electricity, natural gas and heating oil.
Nymex January West Texas Intermediate oil rose as high as $85.44 a barrel in early trading. By late afternoon in New York, it stood at $85.73 a barrel, up $1.97 on the day.
In London, ICE January Brent rose $1.76 to $87.34 a barrel. In early trading the benchmark hit $87.25.
Power prices also rose, particularly in the UK and France on the back of higher demand and rising production costs due to more expensive natural gas.
UK power for next-day delivery rose to its highest in 22 months, according to Bloomberg data. The so-called baseload UK power rate rose to £57 a megawatt-hour, up 26 per cent since the beginning of the month.
UK power prices have risen 60 per cent since January but remain well below the peak of 2005, when spot prices hit a record high of more than £150.
UK natural gas prices rose to their highest since February 2009 with contracts for December changing hands at 55.5 pence a therm, up 5 per cent.
In France, where homes rely heavily on electricity for heating, power prices rose to a one-month high.
Baseload electricity for delivery the following day traded as high as €75 per megawatt hour, up 12.3 per cent on the day.
In Germany, Europe’s biggest electricity market, power day-ahead prices rose 4.5 per cent to a peak of €58.98 a megawatt hour, according to Bloomberg.
Sugar prices rose to a week high of 28.70 cents per pound. Later, ICE March raw sugar traded up 0.9 per cent at 28.49 cents per pound. Raw sugar prices hit a 30-year high of 33.39 cents per pound in early November. Czarnikow, the London-based sugar merchant, said in a report on Monday that demand outpaced supply in the global sugar market in 2010-11 for the third consecutive year – “a result of adverse weather conditions across the majority of producing countries”.
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