Any views and recommendations are offered for your consideration, but may be wrong as the market is highly uncertain, with additional risks which are unknown until they arise. Statements in this press release regarding Catalyst’s business that are not historical facts are “forward-looking statements” that involve risks and uncertainties. © 2001 - 2008 Catalyst Commercial Services Limited. - All Rights Reserved.

Short -Term Risk Drivers

From the highest recorded oil price at the start of July we have seen oil prices soften to the lowest they have been in over 3-months. This pattern has then repeated it self through both gas and electricity as prices have softened during July. The main drivers behind the falls are the increasing fears of recession in the US and UK and a slow down in economic growth in developing nations. In addition to this demand is well below seasonal average and some oversupply is taken place. Conflict with Iran is the main risk of prices rebounding and the market is being supported by tensions over Iran’s potential nuclear programme. Today’s focus appears to have shifted from demand slowdown to supply concerns, which is currently supporting prices. The main fear is the loss of an oil supply resulting from conflict with Iran over their developing nuclear capability. The new Israeli leadership transition over the next three months may reduce these fears for the short term. However, all July price reductions may be lost if there are any further developments. Other factors include a tropical storm forming in the Gulf of Mexico and ongoing troubles in Nigeria.

Long-Term Risk Drivers

Economic fundamentals continue to suggest that market price risk is on the upside. World energy demand forecasts are increasing, despite forecasts that predicted a levelling off. This is been driven by continued economic growth of China, India and other developing countries and western consumers are still increasing demand, despite continued higher prices. Coal prices have increased due to increased demand from developing countries who continue to invest in coal-fired generation plants as a cheap source of electricity.

Views and Recommendations

We have seen the current market run ahead of it long term projected trajectory and the current softening could develop further into a correction before resuming the long-term upward trend. We now expect prices to fall slightly further, but at some point the market will resume its upward trend due to long-term climate change goals. The main risk premium is the risk that prices will rebound suddenly if there are any negative developments in the Middle East. Additional local UK factors include investment requirements for nuclear energy, Norway holding back on forward gas sales, European suppliers retaining gas in storage, and UK suppliers ramping wholesale prices ahead of the October round. However, increasing coal prices could cushion any correction as it may now be driven independently by steel demand. In light of this new development, we recommend waiting for some further weakness in the market and if the market corrects further this would signal a good buying opportunity for up to 24-months. This will position your company well in a long-term upward trend. Our independent approach enables clients to manage their exposure to energy price risk, whilst at the same time benefiting from a first class service from a range of major suppliers. Our procurement solutions make it simple, so contact a member of our team to discuss your requirements.

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