German 2009 Power Falls to 6-Month Low on Earlier Drop in Crude

By Lars Paulsson and Rachel Graham

Nov. 4 (Bloomberg) -- German power for next-year delivery fell to a six-month low after crude oil and coal prices dropped, cutting production costs for generators.

Electricity for 2009 declined as much as 75 cents, or 1.1 percent, to 67.60 euros ($87) a megawatt-hour, according to broker GFI Group Inc. That's the lowest since May 2. The contract traded at 67.70 euros as of 1:50 p.m. Berlin time.

``The year-ahead contract fell this morning because of the drop in the oil price,'' Tobias Meyer, a gas and power trader at SE Scherbeck Energy GmbH, said by telephone from Huerth, Germany.

The European benchmark contract posted its sixth weekly drop at the end of October as coal and oil prices slumped. Crude fell by 33 percent last month while German power lost 12 percent. Oil prices affect other commodities including natural gas, the fuel for about 10 percent of Germany's electricity production.

Oil futures fell as much as $1.66, or 2.6 percent, to $62.25 a barrel in electronic trading on the New York Mercantile Exchange today. They later rebounded to $65.27, up 2.1 percent.

Coal for delivery to Amsterdam, Rotterdam or Antwerp with settlement next year dropped for the second time in three days, slipping 2 percent to $112 a metric ton, according to ICAP Plc. More than a fifth of Germany's power production comes from burning hard coal.

Electricity prices may increase if Barack Obama wins against John McCain in the U.S. presidential election, according to Scherbeck's Meyer.

Election Impact

``If Obama becomes president we could see higher power prices as commodities rise,'' Meyer said. ``An Obama victory is viewed by the market as being better for the global economy than if McCain wins.''

German power for next-day delivery also fell, on expectation warmer weather will curb demand for heating and wind-power production will climb. The contract dropped 12.25 euros, or 15 percent, to 72 euros a megawatt-hour, according to ICAP.

Temperatures in Germany tomorrow are forecast to be as high as 13.7 degrees Celsius (56.7 Fahrenheit), according to Customweather Inc. The average maximum temperature this time of year is 9.7 degrees.

Wind-power production in Germany is predicted to rise to about 3,500 megawatts tomorrow, from less than 500 megawatts today, according to a report from Markedskraft Deutschland GmbH. Germany has more than 19,000 wind turbines, a less reliable form of generation than production from atomic plants or stations fueled by coal or gas.

To contact the reporters on this story: Lars Paulsson in London at lpaulsson@bloomberg.net; Rachel Graham in London at rgraham13@bloomberg.net