COMMODITIES RESEARCH 19 March 2012

WEEKLY EUROPEAN ENERGY MATTERS

Breaking point?
The recent financial results of two of Europe’s largest gas suppliers have made for eye Trevor Sikorski
watering reading. RWE and E.ON posted €800mn and €700mn of gas trading losses in +44 (0)20 3134 0160
2011 respectively. The losses were predominantly driven by both companies having to trevor.sikorski@barclays.com
buy significant volumes of gas under oil-indexed formulas, while having a customer
base that predominantly wanted to buy on a hub-priced basis. RWE reported that of the Amrita Sen
20 bcm it bought under oil-indexed formula, only 2 bcm was sold on a similar basis. +44 (0)20 3134 2266
The remaining 80% of that volume was then at the mercy of the oil-index – hub gas amrita.sen@barclays.com
spread, which certainly did not work in the company’s favour during 2011, a year that
saw modest gas demand and good supply that kept that hub discount healthy. Both Miswin Mahesh
companies did stress that oil-indexed contracts had been renegotiated, were being +44 (0)20 7773 4291
renegotiated or were in arbitration. The goals of such a renegotiation are to either miswin.mahesh@barclays.com
increase the exposure to hub-price indexation or to secure a reduction in the fixed-price
component of the index (a P0 adjustment). The results from some of the successfully www.barcap.com
renegotiated contracts with Russian gas exporter Gazprom, and European utilities
(including Italian importer, Eni) point to the former favouring P0 adjustments – a
solution which ensures that gas prices will continue to track oil, albeit at a lower level
than currently seen. For the hub markets, the big questions here are: what is the size of
the discount being secured? and what is being given away to secure those concessions?
While information on the contract settlements is scant, we estimate that to eliminate
the Q1 13 premium to hub prices, the P0 reduction would need to deliver an 18%
reduction on prices. The importance of the level of discount is that the gap sets the
arbitrage window between hub and oil-indexed prices and has kept the call on hub gas
exports to the continent high throughout the last year (net exports through the
interconnector are 18% higher y/y). If that window is closed, it reduces the call on hub
gas, encouraging gas-to-gas prices to fall further. The concessions to secure the price
discounts will also be important, as any drop in the flexibility imbedded in the contracts
to turn gas either up or down will be felt in the market. While these details are all
unclear, what is clear is that 2012 will be another hard year for participants having to
procure gas on existing oil-indexed formulas.

Figure 1: The gap between hub and oil indexed prices…

120

100 Oil-index - hub spread

80

60

40
Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13
Oil index marker (€cts/therm) NBP hub forward (€cts/therm)
Source: Ecowin, Reuters, Barclay Research

PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES STARTING AFTER PAGE 12
Barclays | Weekly European Energy Matters

OVERVIEW
A fairly flat week last week for most of the commodities, with w/w changes broadly in the
+/- 2% level. While oil bounced around on SPR talks, coal (API2) just gradually dropped
while NBP gas just increased. Mixed policy signals about market intervention pushed carbon
to the lower half of its current trading range, leaving power prices broadly flat, but further
improving coal (dark) spreads at the expense of gas. Barring the unforeseen, the complex is
likely to tick sideways for another couple of weeks before it enters the summer energy
season. A potential upside is for a hot summer to drive incremental demand.

Figure 2: Market data

Drivers Discussion

Oil comment Oil markets were volatile last week, with talks of a coordinated SPR release by the US and the UK helping to
feed some intra-week downside. The markets, however, recovered most of that value once it emerged that the
talks were on the general principle of a release outside the auspices of the IEA, rather than an announcement
of an imminent release. In our view, the SPR headlines just created uncertainty and may have created an
impression that such discussions might reflect concerns over Iran rather than primarily a response to current
prices. While a genuine SPR release announcement would likely be more formally announced, the SPR talks
between Obama and Cameron suggest that: first, the US government seems keener on a pre-emptive release
than most other IEA governments, with many European governments, and the head of the IEA, feeling a
release would be premature; and second, the policy towards and handling of SPR releases is in a state of flux.
We believe that even in the event of a release, the effect on prices will be limited, given the fundamental
tightness in the market. The problem for the governments would be to decide when to stop any release, so
reserve inventories do not run too low and the effectiveness of future releases is not undermined.
Price summary
Market Carbon (EUA) UK Natural gas (NBP) Coal (API-2) German power Oil – Brent crude
(clean dark spreads)
Contract Dec 12 D+1 Y+1 M+1 Y+1 D+1 Y+1 M+1 Y+1
Price level 7.77 €/t 72.5 €cts/th 0.83 €/th 73.4 €/t 89.4 €/t 10.6 €/MWh 8.1 €/MWh 95.5 €/bbl 85.9 €/bbl
w/w % change -4.0% 2.6% 0.8% -1.6% -1.7% 28% -15% -0.5% 0.3%
Power: Efficiency combination Winter 2011/12 (€/t) Summer 2013 (€/t)
fuel switching 54% gas/30% coal 32.3 16.5
50% gas/34% coal 46.2 27.8
48% gas/36% coal 78.5 51.8
54% - oil indexed/30% coal 42.8 34.5
Note: Uses NBP gas and ARA prices for coal. % refers to plant efficiency, first gas and then coal. Numbers refer to required
carbon price to cause coal and gas fired plant to break even given prevailing fuel prices.
Macroeconomic In January 2012, seasonally adjusted industrial production grew by 0.2% m/m in both the euro area (EA17) and the EU27. In
statistics y/y terms, industrial production dropped by 1.2% in the euro area and by 1.0% in the EU27. Source: Eurostat
Note: W/w change refers to €-denominated commodity prices. Source: Barclays Research

Figure 3: Cross-market correlations (90 days)

Oil Gas Coal Carbon Power UK Power GY

Oil 100% 88% -5% 38% 73% -16%

Gas 21% 100% -6% 51% 84% 2%
Coal -82% -39% 100% -43% 0% -25%
Carbon 18% 31% -39% 100% 46% 55%
Power UK 13% 57% -33% 32% 100% 9%
Power GY -16% 75% -13% 40% 70% 100%
Note: Correlations below the 100% diagonal line are the correlations of the most prompt contracts in the market (spot correlation). The correlation figures above the
100% diagonal line are the correlations for the Y+1 (2012) contracts. Correlations of prices rather than returns over 90 trading days.
Source: EcoWin, Barclays Research

19 March 2012 2
Barclays | Weekly European Energy Matters

European carbon
Push me, pull me… Another week, another twist and turn in the long-running saga that is the set aside. The week
started digesting the news that late on the previous Friday, Poland again used its veto in the
Council of Ministers to block an agreement on the 2050 low carbon roadmap. By mid-week,
the market was then confronted with an EU Parliament vote that supported the 2050
roadmap and a resolution to allow the EC to “withhold the necessary amount of allowances”.
So, the messages were mixed but do point to the upcoming co-decision meeting on 26
March, involving the EC, the Council and Parliament, as being something of a make-or-break
meeting on the set-aside. If a clear political signal can be agreed at that meeting, then we
would expect to see the EC go forward with a proposal to amend the auction regulation in
order to fully operationalise the set-aside. While we expect this proposal will set out the
volume and the timing of the set-aside it is less likely that it will set out what to do with the
allowances. We would not expect that decision to be forthcoming for a couple of years. If the
meeting on 26 March fails to provide a clear signal, it is not clear that the set-aside proposal
would be completely dead, but it does feel that the likelihood of getting a political agreement
on it would recede.

Contango narrowed last week
The lack of clear political direction on the set aside left the European carbon market with little
direction and trading in the middle of our expected range. Dec 12 EUAs closed down by 4%
w/w at 7.70 €/t, with some positive news on the set-aside making the market look poised for
some upward reversion back around that 8 €/t mean. The contango opportunities along the
curve are still out there but do look to be coming in with the 12-13 December implied rate of
carry falling from 6.5% to around 6% in the last week. In the first two months of the year,
open interest in those post-2012 contracts have increased by over 60 Mt, about 40% of the
total increase in open interest seen in those contracts last year. CER prices followed the EUA
market down, closing at 3.80 €/t, down 5.2% w/w. The shape of the CER curve has not
significantly changed, with: Dec 12 – Mar 13 trading in backwardation at 0.13 €/t, having
narrowed on the price falls; and Dec 12 - Dec13 is still in contango, trading at -0.78 €/t,
largely unchanged from last week’s close. With both of these spreads reflecting the impact of
the quality restrictions on the CER credits, the outlook for the coming weeks is to be more
about sideways in-range trading. The EUA-CER spread has managed to stabilise around the 4
€/t mean level, which stays in line with our broad H1 12 expectations of where the spread
will be trading.

Figure 4: European carbon drivers

Drivers Details
EUA supply EUA supply – upcoming EUA auction dates: UK: 4 Mt on each of 10 May, 7 June, 5 July; Hungary: 2.5 Mt 2012; Czech Republic:
2.1 Mt 2012; Netherlands: 4 Mt 2012, 1 Mt each 22 March, 19 April, 14 June; Greece: at least 4 Mt in 2012 (2 Mt done January);
Lithuania: 850 kt on 15 March 2012. Additional volumes and countries expected.
EIB sold 23.5 Mt in February, bringing the total of the first three months of sales to 57 Mt.
CER/ERU Weekly issuance CER = 5.4 Mt; Total issuance CER = 888.7 Mt Number of registered CDM projects = 3927 (17 registered)
statistics Requests for issuance = 13.9 Mt JI projects registered: Track 1=306 Track 2 =41
Total issuance ERU = 117Mt Source: UNFCCC (0 new projects registered, 10 in progress)
KP commodities
RGGI Regional Greenhouse Gas Initiative Allowance (RGAs) prices (Dec 12 v12) closed unchanged at $2.00/t.
CCA California carbon allowances (CCAs) closed up 4% w/w at 14.3 $/t for the V13, Dec 13 contract, breaking out to the upside
on the 13-14 $/t range they had traded in for the preceding month.
Source: Barclays Research

19 March 2012 3
Barclays | Weekly European Energy Matters

UK natural gas
Summer starting early While the current winter is ending with a mild whimper, summer demand for LNG to feed
power for expected air-cooling load is driving good demand in Asia. The main buyers of the
cargoes appear to be the big Japanese utilities, supplemented by some additional buying
from China, India and Kuwait. Prices reported (ICIS Heren) for cargoes being sold into Asia
climbed up above the 16 $/mmbtu level, giving Asia a +6 $/mmbtu price advantage over
NBP hub prices for May gas. With tanker shipping costs put at the 4-4.5 $/mmbtu level
from the UK to North-east Asia, the arbitrage window remains wide and is likely being kept
open by the still tight tanker market. Having said that, the arbitrage gains are being reaped
by anyone with access to available shipping and the market reports do suggest that there
are heavy reloads being scheduled over the summer from both Spanish terminals and
Zeebrugge. With NBP likely to see more straightforward diversions, the supply of LNG into
northern Europe this summer does look like it is going to be very light, helping to keep gas-
fired generation very challenged in the merit order.

With LNG diversions and strong oil prices providing support, gains have been limited by the
weather which has helped keep gas demand seasonally low. Last week, LDZ demand was
down by 10% y/y while demand for gas from power was down 23% y/y. The reduction in
demand continues to be balanced by a reduction in LNG, with LNG supply to the grid down
45% y/y. Supply from both Norway and the Netherlands has held up, while withdrawals
from storage continue to be limited, with NBP storage levels remaining up by 1.2 bcm y/y.
Across Europe, gas in storage is still higher than last year although the overhang is much
lower than it was, at just 2.0 bcm. At the beginning of January, this number was 11.6 bcm
higher, suggesting that much of the continental storage overhang has been used up.

Very little change in pricing
Prices last week increased across the curve by <2% for 2012 contracts and 0.8% for the Y+1
contract. The NBP curve remains characterised by the prompt showing little to no premium
to the April contract, providing little incentive for gas in storage to increase the rate of
withdrawal. With the early spring looking like it will persist in Europe, gas in storage should
enter the injection season much longer than last year. The summer curves remain flat at
about 60 p/therm (72 €cts/therm), while the front summer-winter spread stayed around
the 14 p/therm (16 €cts/therm) level.

Figure 5: Supply and demand on the UK NBP

Average mcm/d Last week Previous week Last year

Supply
UK production 153.9 160.7 159.4
Norwegian imports 74.6 79.1 76.7
Dutch imports (BBL) 26.6 26.1 10.2
Belgium imports (IUK) 0 0 7.2
LNG 33.6 48.8 60.0
Demand
LDZ 174.2 186.7 193.4
Power 41.5 41.9 53.2
Industrial 7.5 7.9 7.2
Belgian exports (IUK) 15.0 25.1 0
Storage levels (mcm) 2360 2274 1109
Storage injections (mcm) 86 -44 82
Source: National Grid, BBL, Interconnector, GSE, Barclays Research

19 March 2012 4
Barclays | Weekly European Energy Matters
European steam coal markets
soften over the week,
contango widens
South African prices: still
finding it difficult to price in both
the basins
Further softness expected on the
FOB Richards Bay contract
19 March 2012
Steam coal and freight
Steam coal markets softened over the week, with the second month CIF ARA contract trading
below the 100 $/t throughout the week and settling at 97.88 $/t (down $2.65 w/w). A
sharper fall at the prompt relative to the Y+1 contract has resulted in the contango widening
over the week to close in on the 15 $/t level, while even from these levels, there still remains
further scope for the steepening of the contango, given the high storage and handling costs at
ARA that only opens an arbitrage window at a 22 $/t differential, which would allow a larger
set of market participants to arbitrage the time spread.
The equivalent FOB Richards Bay contract is showing different dynamics. While it drifted lower
over the week, the price erosion was recorded at a much slower pace (by $1.2 w/w to 102.95
$/t). With the differential to the CIF ARA contract now expanding to -$5, South African coal
will find it even more difficult to competitively price into Europe. Further, ample supplies of
competitively priced Colombian and US coal continue to displace South African coal in the
Pacific market as well. For instance, last week saw four South Korean thermal power utilities
awarded spot contracts to take five Colombian cargoes. The delivered price for the cargoes
was put at 112.5-113.50 $/t (Platts) which on a net-back basis is very competitive given the
current Richards Bay FOB of 104 $/t and a freight rate of 13.3 $/t for hiring a Capesize vessel
to deliver into South Korea. The Atlantic basin suppliers are also putting pressure on Australian
suppliers into Asia, with Newcastle prices, in contrast to Richards Bay prices, responding more
aggressively to the competition from US and Colombia. FOB Newcastle prices are lower by
10% since the start of March, compared to the equivalent Richards Bay contract which has
only experienced a 2% decline.
Given that South African coal is now priced out of both the Atlantic and Pacific demand
basins, we would expect further softness in the Richards Bay FOB contract in the coming
weeks, as it reacts to a more competitively priced environment created by Colombian and US
coal from the Atlantic and Australian and Indonesian coal in the Pacific. Especially, with
Europe closed, South Africa and Australia are competing for the same destinations and given
the spread between the two has now narrowed to $0.75, this now fully favours the Australian
suppliers that hold a freight advantage of 2 $/t into South Korea. Given all of this, we do see
potential further downside for South African coal prices as those prices will need to start to
respond more robustly to the level of supply competition we now see in the market.
Figure 6: With Newcastle FOB falling, Richards Bay FOB is far less competitive
20
Newcastle FOB - Richards Bay FOB
15
10
-5
Mar-09 Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12
Source: Reuters, Barclays Research
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Barclays | Weekly European Energy Matters
An odd place…
UK power price gains limited
German prices largely flat
19 March 2012
European power
While coal plant remains a very difficult choice for new investment, it is going through a
period of being the most profitable operational thermal plant in Europe. The increase in dark
spreads compared to sparks has been seen across almost all of the power markets, with UK
Y+1 clean darks at 20 €/MWh far outpacing UK clean sparks at 4 €/MWh. The change in
fortunes has been driven by the change in the relativities of gas and coal prices seen during
H2 11 and continued through Q1 12, and the drop off in carbon prices over the same
period. Using Y+1 prices as a broad indicator of the markets, prices from 1 July 11 to 16
March 12 for hub gas have increased by 9%, while coal prices have fallen by 4%. The big
falls in carbon over the same period (a 41% fall) have all conspired to push coal plant
consistently up the merit order at the expense of gas. Even more efficient gas (54%) against
less-efficient coal (30%) will only be in the money if the EUA price was to increase to the 13
€/t level for the coming summer. The odd place that Europe finds itself in, with investment
risks discouraging coal-fired investment but current prices encouraging short-term coal-
fired generation, points to some current tensions in the various markets. The biggest one is
the tension in the gas market, whereby the main gas producers supplying Europe are
unwilling to abandon oil-indexed pricing and/or unwilling to supply sufficient gas to allow it
to compete for market share on its own merits. Without the helping hand of carbon,
currently in so much over-supply in the prompt market that it does not need to encourage
any further short-term abatement, gas-fired plant is facing very hard times.
Market summary
UK power: UK power prices traded sideways last week, largely reflecting the movements in
the underlying markets. At the prompt, continuing mild weather last week kept prices
muted, staying at relatively high levels (56 €/MWh) on nuclear outage (600MW at
Heysham) and on weaker wind output. The curve again ticked up by 1-2% w/w, reflecting
the modest increases seen in gas prices, while shrugging off further reductions in carbon.
Prompt spreads averaged 3.3 €/MWh while the forward spark spreads across the curve
closed the week trading around the 4.0 €/MWh level. The spreads remain a long way from
encouraging new build, despite the series of announcements from generators (Centrica,
SSE) that plant was either being closed or being used as OCGT, allowing greater
participation in the short-term balancing markets.
Germany: German prompt power prices broadly trended downwards through the week,
remaining pressured by strong solar and hydro levels, closing at 46 €/MWh for the D+1
contract. The near-curve was broadly flat, mimicking the limited movements in coal which
saw summer contracts close down by <1%. With power prices able to shrug off the bigger
falls seen in carbon, spot clean dark spreads closed up 28%, while forward spreads closed
the week at 7.25 €/MWh for Q2 12 contracts, a 14% improvement w/w. The more distant
curve had more movement, and Y+1 and Y+2 traded up 7-8% w/w, but still stayed well
within the 9-11 €/MWh range that has characterised trading this year. German clean sparks
continue to trade negative, at -8.4 €/MWh for the Y+1 contracts, although gas plant in this
market has rarely been baseload.
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Barclays | Weekly European Energy Matters

EUROPEAN CARBON CHARTS

Figure 7: Relative costs of generation – spots Figure 8: Forward prices against fair value (€/t)

Gas SRMC - coal SRMC €/MWh 12

40
11
30 10
9
20
8
10 7
6
0
5
-10 4
3
-20 2012 2013 2014 2015
Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 EUA fair trade (€/t) EUA (€/t)
54% v 30% 48% v 36% CER (€/t) CER fair trade (€/t)

Note: The chart shows the cost of gas-fired generation less the cost of coal-fired Note: Fair value is calculated as front year multiplied by the cost of carry. The
generation using spot prices for fuels and carbon. NBP used for gas and API 2 cost of carry is taken as Euribor. Source: ECX ICE, EcoWin, Barclays Research
used for coal. The first percentage refers to gas-fired plant efficiency, second to
coal-fired plant efficiency. Source: ECX ICE, EcoWin, Barclays Research

Figure 9: EUA, CER and spread prices (€/t) Figure 10: EUA and CER volatility

14 200 CER VOL EUA VOL

12 180

10 160
140
8
120
6
100
4
80
2 60
0 40
Nov-11 Dec-11 Jan-12 Feb-12 Mar-12
20
EUA Front year (€/t) sCER Front Year (€/t) 0
EUA-CER spread Nov-11 Dec-11 Jan-12 Feb-12 Mar-12

Source: ECX, ICE, Barclays Research Note: Ten-day close to historical volatility. Source: ECX ICE, Barclays Research
Figure 11: CDM weekly registrations (number) Figure 12: CDM weekly issuance (Mt CO2)

60 weekly registration (number) 20 weekly issuance (Mt CO2)

18
50
16
14
40
12
30 10
8
20
6
4
10
2
0 0
Jan-11 Mar-11 Jun-11 Sep-11 Dec-11 Feb-12 Jan-11 Mar-11 Jun-11 Sep-11 Dec-11 Feb-12
Source: UNFCCC, Barclays Research Source: UNFCCC, Barclays Research

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Barclays | Weekly European Energy Matters

EUROPEAN NATURAL GAS CHARTS

Figure 13: Gas spot prices (€cts/therm) Figure 14: Gas forward prices (€cts/therm)

80 NBP (€cts/therm) 95

90
75
85
70
80

65 75

70
60
65
55
60
Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13
50
Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 This Week Last Week 3 Months ago
Source: EcoWin, Barclays Research Source: EcoWin, Barclays Research

Figure 15: North European gas storage levels (bcm) Figure 16: Daily Interconnector Flows (GWh/d)

50 Northern Europe 2012 (LHS) BCM 8 80 2009 2010 2011 2012

Northern Europe 2011 (LHS)
45 7
NBP 2012 (RHS) 60
40 NBP 2011 (RHS)
6
35 40
30 5
20
25 4
20 0
3
15 -20
2
10
1 -40
5
0 0 -60
Jan Mar May Jul Sep Nov J F M A M J J A S O N D

Note: NBP = National Balancing Point (UK); Zee = Zeebrugge (Belgium); TTF = Source: IUK, Barclays Research
Title Transfer Facility (Netherlands). Source: GSE, Barclays Research

Figure 17: Norwegian flows to NBP (mcm/d) Figure 18: Dutch flows to NBP (mcm/d)

120 40

100 35
30
80
25
60
20
40
15
20 10

0 5
J F M A M J J A S O N D -
Jan Mar May Jul Sep Nov
2010 2011 2012 2010 2011 2012

Source: DECC, Barclays Research Source: DECC, Barclays Research

19 March 2012 8
Barclays | Weekly European Energy Matters

COAL MARKET CHARTS

Figure 19: Coal spot prices (€/t) Figure 20: Coal forward prices (€/t)

95 CIF ARA 95 €/t

FOB RB

90
90

85
85

80
80
75

75
70 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13
Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12
This Week Last Week 3 Months ago
Note: CIF ARA is coal into Antwerp, Rotterdam, Amsterdam, FOB RB is coal free Note: For CIF ARA Source: EcoWin, Barclays Research
on board at Richards Bay in South Africa. Source: EcoWin, Barclays Research
Figure 21: Freight rates Figure 22: Volatility – front month

ARA-RB (€/t) (LHS) 25

8 2300 10 day close-to-close coal price volatility
Baltic dry index (RHS)
2100
6
20
1900
4
1700
15
2 1500

0 1300
10
1100
-2
900 5
-4
700
-6 500 0
Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12

Note: LHS = implied paper freight, RHS=BDI. Source: EcoWin, Barclays Research Source: EcoWin, Barclays Research

19 March 2012 9
Barclays | Weekly European Energy Matters

OIL MARKET CHARTS

Figure 23: Oil spot prices ($/bbl) Figure 24: Oil forward prices (€/bbl)

130 Brent prices, $/bbl 130 Brent forward curve, $/bbl

120 Range in 2011

120 16-Mar-12
110 One month ago
Two months ago
110
100

90 100

80
90
70
Years to expiry
60 80
Aug-10 Nov-10 Feb-11 May-11 Aug-11 Nov-11 Mar-12 1 2 3 4 5 6 7 8

Note: Brent Crude on left-hand axis and gas oil on right-hand axis. Source: EcoWin, Barclays Research
Source: EcoWin, Barclays Research

Figure 25: Fuel oil prices ($/t) Figure 26: US inventories relative to 5-year average (mb)

800 Fuel oil prices, FOB ARA spot, $/t 45 US inventories relative to the 5 year average, mb
750
35
700
650 25
600
15
550
500 5
450
Low sulphur 1% -5
400
High sulphur 3.5% crude products
350 -15
Aug-10 Nov-10 Feb-11 May-11 Aug-11 Nov-11 Mar-12 Jul Aug Sep Oct Nov Dec Jan Feb Mar

Source: Various, Barclays Research Source: Various, Barclays Research

Figure 27: European oil demand by product Figure 28: European diesel prices ($/t)

1.5 European oil demand by product, y/y change, mb/d USLD 10 ppm FOB ARA, $/t
Gasoline Fuel oil 1050
1.0 Distillates Others
950
0.5

850
0.0

750
-0.5

-1.0 650

-1.5 550
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Aug-10 Nov-10 Feb-11 May-11 Aug-11 Nov-11 Mar-12

Source: Various, Barclays Research Source: Various, Barclays Research

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Barclays | Weekly European Energy Matters

EUROPEAN POWER MARKET CHARTS

Figure 29: German and GB power – spots (€/MWh) Figure 30: German and GB power – forwards (€/MWh)

70 €/MWh
70
65
65
60
GB €/MWh
60
55
DEU €/MWh
50 55

45 50

40 45 GB this week GB last week

35 DEU this week DEU last week
40
30 Apr-12 Aug-12 Dec-12 Apr-13 Aug-13
Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12

Source: Reuters, Barclays Research Source: Reuters, Barclays Research

Figure 31: German and GB power – spot spreads Figure 32: German and GB power – clean forward spreads

30 €/MWh Clean UK spark spread 10

Clean German dark spread 9
20 8
7
10 6
5
0 4
3
-10 2
1
-20 0
M+1 M+2 M+3 Q+1 Q+2 Y+1
-30 GB this week GB last week
Sep-11 Nov-11 Jan-12 Mar-12 DEU this week DEU last week
Note: Assumes plant efficiency for gas of 50%, and 37% for coal. Clean spark spread is spark spread less carbon cost. Source: Reuters, Barclays Research

19 March 2012 11
Barclays | Weekly European Energy Matters
COMMODITIES RESEARCH ANALYSTS
Gayle Berry
Commodities Research
+44 (0)20 3134 1596
gayle.berry@barclays.com
Miswin Mahesh
Commodities Research
+44 (0)20 77734291
miswin.mahesh@barclays.com
Trevor Sikorski
Commodities Research
+44 (0)20 3134 0160
trevor.sikorski@barclays.com
Shiyang Wang
Commodities Research
+1 212 526 7464
shiyang.wang@barclays.com
Commodities Sales
Craig Shapiro
Head of Commodities Sales
+1 212 412 3845
craig.shapiro@barclays.com
19 March 2012
Suki Cooper Helima Croft Paul Horsnell
Commodities Research Commodities Research Commodities Research
+1 212 526 7896 +1 212 526 0764 +44 (0)20 7773 1145
suki.cooper@barclays.com helima.croft@barclays.com paul.horsnell@barclays.com
Roxana Mohammadian-Molina Kevin Norrish Amrita Sen
Commodities Research Commodities Research Commodities Research
+44 (0)20 7773 2117 +44 (0)20 7773 0369 +44 (0)20 3134 2266
roxana.mohammadian-molina@barclays.com kevin.norrish@barclays.com amrita.sen@barclays.com
Nicholas Snowdon Kate Tang Sudakshina Unnikrishnan
Commodities Research Commodities Research Commodities Research
+1 212 526 7279 +44 (0)20 7773 0930 +44 (0)20 7773 3797
nicholas.snowdon@barclays.com kate.tang@barclays.com sudakshina.unnikrishnan@barclays.com
Michael Zenker
Commodities Research
+1 212 526 2081
michael.zenker@barclays.com
Martin Woodhams
Commodity Structuring
+44 (0)20 7773 8638
martin.woodhams@barclays.com
12
Analyst Certification(s)
We, Miswin Mahesh, Amrita Sen and Trevor Sikorski, hereby certify (1) that the views expressed in this research report accurately reflect our personal views
about any or all of the subject securities or issuers referred to in this research report and (2) no part of our compensation was, is or will be directly or indirectly
related to the specific recommendations or views expressed in this research report.

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