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NORDIC – Curve extends gains on dry weather, buoyant spot

(Montel) Nordic power futures extended the previous day’s gains on Tuesday amid a combination of forecasts for dry weather, rising spot prices and stronger German power.

The front-quarter contract traded last up EUR 0.05 at EUR 23.45/MWh, while the front year stood EUR 0.08 higher on the day at EUR 24/MWh on the Nasdaq Commodities exchange.

The two contracts have gained EUR 6.35 and EUR 3.65 since 14 August, respectively, mainly in response to a shrinking surplus in the hydrological balance – a measures of potential hydropower supply stored in reservoirs, soil and snow.

“We have seen a very strong rise in prices the last 10 days, which off course is due to the deteriorating hydrological balance, stronger spot prices and gaining German power prices. This is a bullish combination for the Nordic market,” said senior analyst Sigbjorn Seland at StormGeo.

He added that hydropower producers appeared to be regaining control from a recent influx of snowmelt and wet weather in July which led to full reservoirs and a lot of unregulated hydropower production.

Looking ahead, different weather forecasts indicated 1.8-5.5 TWh of potential hydropower production from rain over the next 10 days, below the norm of 6.5 TWh, according to Energy Quantified (EQ), a Montel company.

The hydrological balance currently stood at 12 TWh and would weaken further given the outlook for dry weather, Seland said, noting, however, that the current level was still very strong ahead of the traditionally wet autumn season and could limit price gains.

“There is no indication in the forecasts now that we will see anything but a normal September. In addition, there will come a lot of new wind power production online [both in Norway and Sweden] before the end of the year,” Seland said.

In Norway and Sweden new power production – mainly wind power – with an annual output of 8.8 TWh will come online in 2020, with the bulk seen in the second half of the year, according to the Norwegian and Swedish regulators.

Meanwhile, in the German market, the front-quarter contract traded last up EUR 0.29 at EUR 39/MWh on the EEX. The benchmark EU carbon price, which also generally influences Nordic power, stood EUR 0.19 higher on the day at EUR 27.67/t on Ice Futures.

Steady spot
Closer in, the day-ahead contract last traded at EUR 13.50/MWh, compared to the current session’s system price of EUR 14.90/MWh.

Still spot prices had been setteling below EUR 13/MWh from March through July, reaching a record low earlier in the summer.

Montel’s AI-based tool pegged Wednesday’s spot at EUR 12.69/MWh.

Nordic wind power generation was expected to increase somewhat from an average of 4.3 GW on Tuesday to 4.2-5.3 GW on Wednesday, according to EQ.

Reporting by:
Gert Ove Mollestad
11:24, Tuesday, 25 August 2020