GERMAN – Cal 18 retreats from 1-month high

(Montel) Germany’s benchmark power contract pulled back from its highest level in a month on Tuesday, though it remained above a psychologically important support marker of EUR 30/MWh.

The 2018 contract last traded at EUR 30.05/MWh, down EUR 0.16 on the day on the EEX exchange. The Cal 18 opened at the previous session's intraday high of EUR 30.25/MWh and has steadily lost ground since.

“At the moment we are battling with the EUR 30/MWh,” said one German power trader. “We have thin liquidity but that suggests we could stay above for a while.”

Traders pointed to softer markets in coal, the main price-setting fuel in Germany, and carbon emissions.

Front-year hard coal deliveries to northwestern Europe were down USD 0.53 at USD 66.85/t as contracts pulled back from a seven-week high on the Ice exchange. Carbon was also down a touch, with the Dec 17 EUA contract at EUR 4.91/t after hitting EUR 5/t on Monday for the first time since 13 April.

Coal remains at the upper bound of a range it has been trading since early April. Analyst Diana Bacila at Nena attributed the present support to rainfall-related disruptions in major exporters Australia and Colombia.

However, plans to curb low quality coal imports into China, the world’s largest consumer, heralded bearish news for the seaborne market, she added.

“Asia will continue to set the trend for Europe,” Bacila said, highlighting air-conditioning as a potentially large source of added demand if temperatures are hot in Asia this summer. “The drivers in Europe are mostly bearish, only Asia tends to provide support.”

Wind pressures spot
Spot prices are set to fall on the back of a near doubling in wind generation, though analysts have trimmed their forecasts, which was supporting Wednesday delivery during the present session.

Baseload for Wednesday last traded at EUR 31/MWh at one broker, EUR 3.47 below where Tuesday delivery settled on the Epex Spot exchange. However, Wednesday has gained EUR 0.75 against its previous close.

Average wind generation should rise by 6 GW to 14.2 GW on Wednesday, while solar should average 13 GW during peakload hours, down 2 GW, according to analysts’ views collated by Montel.

The midday peak in combined solar and wind generation should hit 34 GW, up from TSOs’ expectations of around 30 GW for today.

Combined lignite and nuclear availability will slip around 300 MW to 24.2 GW or 78% of installed capacity, according to an EEX outlook.

Utilities plan to stop two hard coal units over the next two days (Moorburg A, Ibbenbüren B) as well as one lignite unit (Jänschwalde E) for multi-day outages.

Reporting by:
Nathan Witkop
nathan@montel.no
11:59, Tuesday, 23 May 2017

Editing by:
Robin Newbold
robin@montel.no
11:59, Tuesday, 23 May 2017