Société Générale said that the energy complex will fall further this week before taking a breather, with the German Cal 12 power contract closer to EUR 52 per MWh, than EUR 53 per MWh.

It added that "Our view is based both on market sentiment driven dynamics and on a reading of fundamentals. All in, we see quite a bearish environment."

It is bearish about UK gas, predicting the January 2012 contract to end the week below 61.2p/th, while Cal 12 coal in the API 2 window will fall to USD 112 per tonne and carbon fundamentals are still pointing south, with the December 2011 EUA contract likely to test lows under EUR 7 per tonne again. The Cal 12 contract for German base load power closed at EUR 53.11 per MWh, while January 2012 UK gas settled at 61.60p/th and Cal 12 coal last traded at USD 112.75 per tonne, with the December 2011 EUA contract closing at EUR 7.71 per tonne.

The bank said that "In terms of market sentiment, it is actually hard to see anything but a continued decrease in prices, based on the evolution/contagion of the sovereign debt crisis feeding into an environment where every week brings more evidence of a slowing down (if not receding) European economy."

It added that "In addition to the negative macroeconomic environment, fundamentals continued to be unsupportive and weak, with winter weather exerting additional downward pressure on power, coal and gas prices."

The bank said that "In terms of carbon, the macroeconomic situation will be of key importance and we expect carbon prices to follow the evolution of European equity markets and EUR/USD rate pattern quite closely."

(Sourced from Montel)