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NORDIC – Front falls EUR 1 on “very bearish” weather outlook

(Montel) Nordic power contracts near delivery were trading EUR 1.05 lower on Thursday amid significantly wetter and windier weather forecasts.

The July contact was last seen down EUR 0.90 at EUR 6.50/MWh, while the front quarter shed EUR 1.05 to EUR 12.35/MWh on the Nasdaq Commodities exchange.

“The market is sharply down and is mainly driven by more precipitation in the weather forecasts. It is especially the last EC00 operational forecasts which is very bearish, indicating an end to the dry period,” said StormGeo analyst Sigbjorn Seland.

Different weather forecasts indicated 0.7-4.2 TWh of rain over the next 10 days, below the norm of 4.6 TWh. However, the latest EC00 operational forecast indicated a shift to above normal precipitation levels towards the end of the period, according to Montel’s Energy Quantified (EQ).

Prices were also subdued by the strong hydrological balance – a measure of reserves stored in reservoirs, snow and soil – which currently stood at around 20 TWh and would only weaken slightly going forward, Seland added.

“The resource situation is extremely strong so there is no reason to expect a rise in spot prices any time soon,” Seland said, adding they might not increase significantly until September.

Subdued spot
The Nordic system price had averaged at EUR 3.41/MWh in June to date, while the July contract traded as high as EUR 9.70/MWh on 9 June, which had been far too optimistic given the strong hydrological balance, Seland said.

He also pointed to area prices in hydropower-rich southern Norway, which had lingered at only EUR 1.57/MWh on average so far this month.

“The weather forecasts also indicate a wind power output above 9 GW [towards the end of the current 10-day period]. Combined with the ongoing strong snowmelt, this will send spot prices back to the EUR 1.50/MWh level,” Seland said.

The day-ahead contract was last quoted in a bid-offer range of EUR 2.50-4/MWh, compared to the current system price of EUR 4.47/MWh.

Montel’s AI-based tool predicted the system price to slide to EUR 2.94/MWh.

Nordic wind power generation was expected to increase from an average of 1.7 GW currently to 3-3.7 GW on Friday, according to EQ.

Further out, the 2021 contract last traded up EUR 0.2 to EUR 24.1/MWh, taking cues from the German Cal 21 contract, which was EUR 0.76 higher to EUR 39.1/MWh, while the Dec 20 EUA contract gained EUR 0.98 to EUR 23.73/t.


Reporting by:
Gert Ove Mollestad
11:12, Thursday, 18 June 2020