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NORDIC – Front slides on swelling reservoirs

(Montel) Nordic front power futures traded lower amid a wet, mild and windy weather outlook, which would push Norwegian prices lower due to swelling reservoirs, market participants said.

The front-month contract last traded down EUR 0.5 at EUR 16.10/MWh, while the front-quarter contract lost EUR 0.45 to EUR 20.70/MWh, on the Nasdaq Commodities exchange.

“Norwegian reservoirs are currently standing at around 95% full and there is a lot of rain coming in,” said senior analyst Sigbjorn Seland at StormGeo. “So there is a high probability of … extremely low spot prices.”

“The system prices will also turn out extremely low in periods with high wind power production. We will have this situation at least until the middle of October.”

He characterised the situation as balancing on a “knife edge”, as hydropower producers were being forced to produce at full pace due to the swelling reservoirs and the high inflow, a similar situation to the one seen this summer.

Various weather forecasts indicated 8.1-12.3 TWh of potential hydropower production from rain over the next 10 days, well above the norm of 6.9 TWh for the period, according to Energy Quantified (EQ), a Montel company.

The bearish weather outlook would especially hit system prices during the coming weekend, Seland said.

System prices crushed

“We will see a lot of wind power in the system, along with a high inflow due to the wet weather, so the system prices for Saturday and especially for Sunday will be completely crushed,” Seland said.

The Saturday and Sunday contracts settled at EUR 5.75/MWh and EUR 4.5/MWh, respectively, in the previous session.

The day-ahead contract was last quoted in a bid-offer range of EUR 8.5-10/MWh, compared with the current session’s system price of EUR 6.96/MWh.

Nordic wind power generation was expected to dip from an average of 9.3 GW in the current session to 7-8 GW on Friday before rising as high as 9.3 GW on Sunday, according to EQ.

Weaker fuels and carbon markets, along with a sliding German market, also weighed on the Nordic market, Seland said.

The Nordic front-year contract last traded down EUR 0.2/MWh at EUR 23.25/MWh.

The hydrological balance – a measure of reserves stored in reservoirs, snow and soil – stood at 13.8 TWh and would rise to 19 TWh on 8 October, according to EQ.

Reporting by:
Gert Ove Mollestad
11:26, Thursday, 24 September 2020