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Nordic spot power eyes 8% drop in April on lower demand

(Montel) Nordic power spot prices looked set to fall 8% this month – to their lowest since May last year – as the Easter holiday and warming temperatures will curb demand amid some increased hydropower inflows from snowmelt, said analysts.

The April futures contract closed at EUR 37.60/MWh on Friday, down from last month’s average system price of EUR 40.86/MWh.

“We have a slight deficit in hydro resources and as long as temperatures stay close to normal – as suggested in the most recent forecasts – hydropower producers should be able to keep prices at these levels,” said Sigbjørn Seland, chief analyst at StormGeo.

“We saw a marked change to drier forecasts over the weekend. Inflow to the power plants will actually decline over the next two weeks, and there is not much wind in the forecasts either,” he added.

Other analysts agreed.

“At the moment it doesn’t look like we will see any strong rise in inflow from snowmelt until week 17 [23-28 April]. That should prevent prices from falling very low during Easter [18-22 April],” said Refinitiv analyst Ole Tom Djupskås.

He expected an average system price of EUR 37/MWh this month, while analysts at Wattsight forecast spot prices to average around EUR 1 higher, as the start of the nuclear maintenance season would partially offset the effect of lower demand.

All analysts said the hydrological balance – a measure of potential hydropower output stored in snow, reservoirs and soil – had increased strongly during March.

And that would explain why the April contract had shed 12% over the past four weeks.

Refinitiv estimated the current deficit in the hydrological balance would stay at 5.5 TWh in two week's time, up from a deficit of 14.4 TWh at the start of March.

Other factors
Analysts also cited softer gas and German power prices for weighing on the Nordic power market.

“Nordic power is currently priced slightly above Germany to get net import. If gas prices continue to fall, it will also have an impact on Nordic price levels,” said Seland.

The short-term marginal cost for a typical gas-fired power plant in April currently stood at EUR 36.35/MWh, while that for a coal-fired plant stood at EUR 42.44/MWh, according to analysts at Energi Danmark.

The German April baseload contract expired at EUR 35.90/MWh on the EEX on Friday, at the lower end of its EUR 41.65-35.05/MWh trading range last month.

Traders would also continue to monitor developments in the CO2 market, which generally influences Nordic prices.

The Dec 19 EUA contract was last seen at EUR 21.27/t, down 0.27 from Friday’s close. 

Earlier today, preliminary data showed EU ETS emissions fell 4.2% in 2018, slightly more than analysts’ expectations in a Montel poll last week.


Reporting by:
Olav Vilnes
15:00, Monday, 1 April 2019