Nena News

NORDIC – Prices rise on fear of April supply squeeze

(Montel) Nordic power prices are rising on Friday as weather forecasts indicate lower temperatures, which could limit snowmelt and trigger a supply squeeze with increasing peak prices.

The front-week contract last traded at EUR 23.45/MWh, up EUR 0.30, on the Nasdaq Commodities exchange, while the April contract last changed hands at EUR 25.10/MWh, up EUR 0.50.

“Prices rise due to the weather forecasts indicating lower than normal temperatures until [the] middle of April. We could see a tightening supply situation as the snowmelt could be postponed,” said Sigbjørn Seland, senior analyst at Nena.

Higher peak prices were an indication the situation was already becoming more strained and they would rise further if the cold weather persisted, he added.

“If the latter part of April also turns out cold, prices in week 16-18 [from 13 April] has quite large upside potential,” Seland said.

“There is little snow in low-lying country [both in Norway and Sweden] so the first phase of the snowmelt will be a disappointment and this supports the rising April contract,” said portfolio manager Gunnar Aronsen at Trønderenergi.

No spot crash
Several reservoirs are now almost empty ahead of the expected snowmelt, he added, allowing hydropower producers to avoid a crash in spot prices in April and May.

“I think the April contract hit bottom when it traded below EUR 24/MWh on Monday,” Aronsen said.

The reservoir content in the Nordic region stood at 37.5% at the end of last week, which is 2.2 percentage points below the level at the same time last year, according to figures released by Nord Pool Spot on Wednesday.

The weather forecasts indicate 6.1-9.1 TWh of potential hydropower output from rain and snow in Norway and Sweden over the next 10 days, compared to a norm of 3.6 TWh, while temperatures in the region are expected to average 0.7-1.8C, well below the norm of 2.6C, according to Swedish forecaster SMHI.

The day-ahead contract was last quoted in a bid-offer spread of EUR 24.25-24.40/MWh, compared to the current session’s EUR 26.70/MWh. 

Wind power output in the Nordic region is expected to more than triple to 2.5 GW on Saturday, according figures from analyst Nena, and this put a pressure on the system price, Aaronsen said.

Further out on the curve, the 2016 contract last traded at EUR 28.40/MWh, up EUR 0.25.


Gert Ove Mollestad
10:41, Friday, 27 March 2015