Figure 1: America's spot Western Texas Intermediate (WTI) crude and Europe's spot Brent Blend crude markets are closely linked 2
Figure 2: Longer term, the US oil curve is stronger than its European peer, reflecting the strength of forward US demand fundamentals 3
Figure 3: Chinese oil demand growth will place an increasing burden on global crude production, but America's dominance will persist 4
Figure 4: As the predominant consumer of crude and its derivative products, America's stock position has a strong impact on global oil prices 5
Figure 5: US commercial crude oil inventories are at their highest level in almost a decade 6
Figure 6: Gasoline inventories are, however, at their lowest mid-summer position in recent years 7
Figure 7: US refinery utilization has been consistently near a four- year low throughout 2007 8
Figure 8: Healthy US crude stocks have limited imports into the world's largest consuming market 9
Figure 9: By contrast, crude product imports are unseasonably high to bolster gasoline stocks 10
Figure 10: Key crude product markets (gasoline and heating oil) are driven by seasonal shifts in demand, underpinning oil prices year-round 11
Figure 11: Europe's benchmark Brent oil price has a stronger relationship with longer-term gas prices, which lack other fundamental certainties 12
Figure 12: Oil's influence on gas is traditionally stronger during the lower demand summer period 13
Figure 13: The 2007 crude spike has dented the oil-gas price correlation for both summer and winter 14
Figure 14: High costs for procuring forward gas contracts are not hindering opportunities to make margins at the retail end in Germany 15
Figure 15: The volatility and instability of prices in 2005/06 has subsided, paving the way for new opportunities for retail suppliers in the UK 16
Figure 16: Despite Germany's retail domestic price being one of the highest in Europe, a gross margin is consistently present 17
Figure 17: The picture looks bright for power suppliers but it is too early to benchmark competition in Europe 18
Figure 18: German versus UK retail domestic bills comparison 19
Figure 19: UK end users enjoy the cheapest gas prices of western Europe's major economies 20
Figure 20: UK retail power prices are yet to reflect the full impact of wholesale market downturn 21
Figure 21: Coal has overtaken natural gas as the predominant source of UK power generation 22
Figure 22: Power generator demand for profitable coal has grown rapidly year-on-year since 2005 23
Figure 23: Coal delivers consistently higher margins than gas across NW Europe to 2010 24
Figure 24: While coal plant continues to deliver the greater profitability, strong seasonality in UK gas pricing offers fuel switching opportunities 25
Figure 25: RWE's vast German coal-fired fleet will theoretically deliver consistent gross generation margins of over €10/MWh to 2010 27
Figure 26: The import-dependent Dutch power market offers the strongest average gross generation margins for both coal and gas to 2010 28
Figure 27: The geographic proximity of the Dutch TTF and the German BEB & EGT gas markets creates price symmetry 29
Figure 28: Quarter-Ahead prices illustrate a relationship between the TTF market and the BEB gas hub 30
Figure 29: The TTF market and the EGT hub in northern Germany exhibit a stronger price correlation 31
Figure 30: Forward quarterly prices show a weaker relationship between the TTF and the EGT 32
Figure 31: Surprisingly, BEB forward quarterly prices shows little or no correlation with the TTF 33
Figure 32: The EGT shows some positive clustering using the 2010 Year-Ahead contract 34
Figure 33: The BEB hub appears to be roughly in line with EGT, although arguably more dispersed 35
Figure 34: Year-Ahead purchases delivered positive gross retail margins throughout the bull-run 36
Figure 35: Weighting wholesales energy costs by seasonal changes in demand creates a cost-reflective picture of theoretical gross margin 38
Figure 36: Forward volume-weighted wholesale costs are currently lower when buying Year-Ahead 39
Figure 37: NW European power prices took a sharp downturn in July 2007 40
Figure 38: Year-Ahead prices continue to stay strong but at the near end of the curve quarterly and Month-Ahead contracts diverge sharply 41
Figure 39: French Year-Ahead contracts took on a more bearish tone this month, while quarterly and monthly prices turned abruptly 42
Figure 40: In contrast to June, German prices flipped, with quarterly contracts rising, annual falling and Month-Ahead down-turning sharply 43
Figure 41: Dutch baseload prices mirrored the major European markets as they closely tracked the European trend 44
Figure 42: UK baseload remains stable and strong as outages, flooding and seasonally low temperatures left power markets largely unaffected 45
Figure 43: NW European gas prices are bucking their recent downward trend 46
Figure 44: The UK's short-term supply concerns were again the center of attention, but at the far end the outlook remains stable 47
Figure 45: Bullishness dominated TTF prices, particularly on the near end of European trading, and quarterly contracts were hit hardest 48
Figure 46: Zeebrugge matches bullish sentiment as the movement to Q4 2007 reminded traders of the onset of winter - lifting quarterly prices 49
Figure 47: Energy pricing proposition 50
Figure 48: Generation spread methodology 53
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