NORDIC – Front end dips on wet weather outlook

(Montel) Nordic power front forwards dipped early on Tuesday amid a wet weather outlook, while the long end of the curve rose on the back of a buoyant fuel complex.

The front-week contract last traded down EUR 0.15 at EUR 31/MWh, while the front quarter was off EUR 0.30 at EUR 31.20/MWh on the Nasdaq Commodities.

Different weather forecasts indicate 9.4-14.7 TWh of potential hydropower supply from rain in Norway and Sweden over the next 10 days, considerably above the norm of 6 TWh, according to Swedish forecaster SMHI.

“We have seen a quite strong period in the market where the hydropower producers have raised their prices. Now however, the question is whether the wet weather forecasts will force them to lower their prices again,” said senior analyst Sigbjørn Seland at Nena.

He said the hydrological balance – a measure of reserves stored in reservoirs, snow and soil – had risen from about 0 TWh by the end of last week to up towards a surplus of 5 TWh with the latest weather outlook.

“However, I think the downside [in prices] is quite limited, as we must see a lot of the forecast precipitation actually being delivered before the hydropower producers lower their prices,” he added.

“Stable spot”
The day-ahead contact was last traded at EUR 34.05/MWh, compared to the current session’s price of EUR 34.69/MWh.

“The Nordic nuclear output is currently low and the reservoir levels are around normal, so I think the hydropower producers will be able to remain in control. Hence, I think we will see stable spot prices this week even though the forecasts are wet,” said trader Martin Emblem at Nowegian utility Tafjord Kraft.

Nordic wind power generation is expected to increase slightly from an average of 3.4 GW in the current session to 3.6 GW on Wednesday, according to Nena figures.

Strong fuel complex
Further out, the front-year contract last traded at EUR 27.60/MWh, up EUR 0.05, while the 2019 contract was last seen up EUR 0.20 at EUR 24.90/MWh.

“It seems quite clear that the long end is systematically underpriced given that the fuel complex is very strong ant that the [upward] trend seems to remain intact,” Seland said.

The API 2 2018 coal contract last traded at a fresh high of USD 79.65/t, up USD 0.77, on Ice Futures. This is the highest level since 30 October 2014.

The December 17 EUA contract last traded up EUR 0.09 at EUR 6.02/t.