(Montel) Nordic spot power prices will likely average below EUR 35/MWh in June, as a wet May and flagging fuel prices have dampened price expectations by EUR 5-7 in recent weeks, according to analysts.
The June futures contract was last seen trading at EUR 34.35/MWh, down from EUR 41.85/MWh at the start of the month and lower than the May spot price average of EUR 38.07/MWh.
Wet weather in May has helped reduce a long-standing deficit in the hydrological balance – a measure of potential hydropower output stored in reservoirs, snow and soil.
According to analysts at Wattsight, the deficit in the hydrological balance will narrow to 3.4 TWh in a fortnight, compared with the deficits of 6.2 TWh currently and 13.4 TWh at the start of the month.
“We are slightly more bearish than the market for June. The hydrological balance has improved a lot in a short time, and we will also have much higher nuclear availability than normal next month,” said Tor Reier Lilleholt, Wattsight’s chief Nordic analyst.
Nuclear power output in Sweden and Finland should increase from 89% of installed capacity currently to almost 100% in the second half of the month, according to the operators’ maintenance schedules.
Meanwhile, falling gas and coal prices were also fanning bearish sentiment in the Nordic power market, said Lilleholt.
For instance, the short run marginal cost of a typical coal-fired power plant for third-quarter production has dropped by EUR 2.70 to EUR 44.30/MWh since the end of April, according to Wattsight data.
Low night prices
The improving hydrological balance has been weighing on Nordic power prompt prices in recent weeks, particularly during the night when demand is low and wind generation has been robust.
“We are facing a 10 TWh improvement of the hydrological balance from mid-May to mid-June. Clearly this has a strong impact on prices,” said StormGeo analyst Sigbjørn Seland.
Portfolio manager Arne Österlind at Shepherd agreed, pointing out that hourly prices during the evenings have fallen close to zero at times, particularly in Sweden.
“We have seen a sharp downturn in prices. Particularly during night hours, it has been difficult for Swedish producers to get a good price when there is also high wind output,” he said.
Spot prices in Stockholm averaged EUR 34.82/MWh in May, considerably below the Oslo average of EUR 39.46/MWh, with Norwegian hydropower producers being able to store water in large reservoirs at hours of low demand.