Nena News

NORDIC – Forwards sink to fresh record lows

The contract for May last changed hands at a record low EUR 22.15/MWh on the Nasdaq Commodities exchange, down EUR 0.35 from the prior close, with the contract shedding EUR 4.10 since it opened on 2 January, or almost 16%.

If the Nordic system price averages the above level next month, May’s power prices will be the cheapest since 2007.

The Q3 contract last traded at EUR 22.15/MWh, down EUR 0.30 on the day, having traded at an all-time low EUR 22.05/MWh earlier in the session, and shedding EUR 4.40 (17%) since 2 January, while the front-year contract was also seen at a fresh record low of EUR 27.20/MWh, down EUR 0.20.

“The spot came out almost a euro lower than expected, so that’s probably having an impact on the market now. In addition, prices are pushed down by enormously wet weather forecasts,” said Sigbjørn Seland, chief analyst at Nena.

Low spot

The system price out-turned at EUR 22.28/MWh, down EUR 2.28 from the prior out-turn and the lowest level since 12 April.

“I think the system price settled lower than anticipated because inflows [to the hydropower plants] are probably increasing more now than most people have anticipated,” said Seland.

“Temperatures have recently tended to be a bit higher than in the forecasts and that’s led to higher snowmelting and more uncontrolled [hydropower] production,” he added.

Forecasts showed 7.3-10.3 TWh of potential hydropower generation from rain and snow in Norway and Sweden over the next 10 days, well above a seasonal norm of 3.2 TWh, while temperatures are expected to average 5.6-6.6C, below a norm of 7C, according to Swedish forecaster SMHI.

The May contract is likely to be undervalued now, however, because forecasts show temperatures are set to fall and that will delay snowmelting, Seland and trader Haakon Knudstad at BKK agreed.


Reporting by:
Iselin Rønningsbakk
14:47, Wednesday, 22 April 2015