(Montel) Futures contracts followed their sharp falls in the prior session with more losses on Tuesday as weather forecasts indicated the winter was “definitely over”.
The front-month contract last traded EUR 0.55 lower at EUR 43.65/MWh, after plunging EUR 4.50 on Monday, while the front quarter was flat at EUR 40.50/MWh and the front year fell EUR 0.4 to EUR 34.5/MWh. The latter two contracts lost EUR 3.40 and EUR 1.35, respectively, in the previous session.
“The main adjustment came yesterday with a change to very bearish weather forecasts and sliding gas, coal and German markets. Then the Nordic market had to adjust down,” said senior StormGeo analyst Sigbjørn Seland.
“One thing is clear, the winter is definitely over. Now the weather forecasts indicate mild weather throughout February, so the fear for a cold snap which persisted [until a few days ago] is gone,” Seland said.
Different weather forecasts indicated 8-10.5 TWh of potential hydropower production from rain and snow over the next 10 days, compared to a norm of 7.3 TWh, while temperatures were forecast to rise up to 6C above the norm this weekend, according to Energy Quantified (EQ), a Montel company.
Fresh four-week forecasts also indicted temperatures up to 4C above normal and more precipitation, SMHI said.
“The hydrological balance has strengthened by 5-6 TWh since Friday. The market is pricing in a further fall,” Seland said, adding he also expected spot prices to continue their slide.
The hydrological balance – a measure of reserves stored in reservoirs, snow and soil – would improve to -14 TWh at the end of week 9 (3 February), Seland said.
Prices were also subdued by a lower carbon price, said market participants, with the Dec 19 EUA contract last traded down EUR 0.55 at EUR 21.85/t on Ice Futures.
Lower spot
Closer to delivery, increasing temperatures, a lower German spot and higher wind power in-feed would dampen the Nordic system price by several euros, Seland said.
The current system price out-turned at EUR 48.07/MWh and the day-ahead contract was last quoted in a bid-offer range of EUR 45.5 - 46.80/MWh.
Montel’s AI-based spot tool predicted a system price of EUR 46.63/MWh.
Wind power generation was expected to increase from an average of 6 GW currently to 8 GW, according to EQ.