(Montel) Futures extended contract highs on Thursday as the weather was set to remain hot and dry for the foreseeable future.
The June contract was last seen up EUR 0.95 at EUR 42.35/MWh, while the Q3 18 was EUR 0.77 higher at EUR 41.90/MWh on the Nasdaq Commodities exchange – both contract highs.
“It is once again the weather forecasts that are driving prices. The forecasts continue to postpone the change to more normal weather conditions,” said Phong Le, senior trader at Energi Danmark.
The 10-day forecast remains much drier and warmer than normal, with traders pointing to the latest EC 00 model that predicts only 14% of normal precipitation levels.
“We have seen a strong price rise from some time now but this is also justified by the weakening we have seen in the hydrological balance and the rise in production costs for thermal plants,” said Sigbjørn Seland, chief analyst at Storm Geo.
“Today’s forecast suggests dry and warmer weather for at least 10 more days. We should then narrow the gap towards German prices.”
The German Q3 contract was last seen at EUR 44.80/MWh, up EUR 0.65 and almost EUR 3 above its Nordic equivalent.
Weaker carbon
Further out, the front-year contract opened down in response to weaker carbon prices but was last seen up EUR 0.12 at EUR 35.05/MWh.
The Dec 18 EUA contract fell to as a low as EUR 15.11/t in early trade but was last seen at EUR 15.57/t on Ice, down EUR 0.27.
“We believe the front-year Nordic power contract is heavily underpriced as the short-term marginal cost for coal-fired plants next year stands at EUR 46/MWh, according to our estimates,” said Tor Reier Lilleholt, senior analyst at Wattsight.
On the prompt, the system price for Friday will probably out-turn at around EUR 44.20/MWh, up from the current EUR 42.98/MWh, due to lower wind power output, said Markus Herranen, analyst at Enegia.
The day-ahead contract was last quoted in a EUR 44.25-45.50/MWh bid/ask range.
Wind power output is set to decline from 3.9 GW on average currently to 2.6 GW on Friday, according to Energy Quantified, a Montel company.
Reporting by:
Olav Vilnes
olav@montel.no
10:57, Thursday, 31 May 2018