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NORDIC – Front month climbs EUR 3 on colder, drier outlook

(Montel) Nordic power futures rose on Monday morning, with the front month surging more than EUR 3 – or 50% – amid forecasts indicating a shift to colder and drier weather.

The December contract traded last at EUR 9.15/MWh, up EUR 3.15 from Friday’s close, while the Q1 contract stood EUR 2.87 higher at EUR 14.62/MWh. On Friday, the two contracts plumbed record lows at EUR 6/MWh and EUR 11.70/MWh.    

“The outlook looks primarily drier today which lifts the contracts,” said trader Ulrik Ljungars at Modity. 

“However, the weather forecasts are not super-bullish. They are now more pointing to weather closer to normal, with temperatures still above reference and rain around or even below normal,” he said.

The latest 10-day outlook estimated precipitation equivalent to 5.7-6.8 TWh of potential hydropower production, compared with a seasonal average of 7.5 TWh, according to Montel’s Energy Quantified (EQ).

Temperatures, meanwhile, should fall from 2.5C-4.5C above normal in the coming days to normal levels at the end of this week, EQ data showed. 

As a result, the hydrological balance – a measure of reserves stored in reservoirs, snow and soil – should decrease from a current surplus of 28.6 TWh to 24.9 TWh in the coming two weeks.    

“The market rose today amid indications that the hydrological balance will drop,” said chief analyst Sigbjorn Seland at StormGeo

“But when you look towards the outlook for December, it still does not indicate to that the overall trend of milder and wetter weather will disappear. So, the market could very quickly turn down again,” he added. 

Further out on the power curve, the Cal 21 was last seen up EUR 2.25 at EUR 14.10/MWh.

Both Ljungars and Seland cited buoyant carbon and German power prices for providing some support to the front-year contract.

Germany’s Cal 21 was last seen EUR 0.85 higher at EUR 39.15/MWh on the EEX exchange, while the benchmark EUA contract last traded up EUR 0.50 at EUR 27.24/t on Ice Futures.   

Spot to rise   
Seland predicted the system price for Tuesday delivery to rise from the Monday delivery settlement of EUR 3.81/MWh. Ljungars pegged it at EUR 4.5/MWh, amid an expected drop in wind power generation.

Average wind power output should decrease from 11.6 GW currently to 8.8 GW on Tuesday, according to EQ, while consumption was expected to hold steady at 50.6 GW.   

Montel’s AI-based model predicted the system price to out-turn at EUR 3.95/MWh.  


Reporting By:
Wilhelm Zakrisson
11:36, Monday, 23 November 2020