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NORDIC – Front jumps EUR 4 on drier outlook

(Montel) Nordic power futures rose sharply on Tuesday morning in response to drier forecasts and higher fuel prices amid reports of Russian troops entering eastern Ukraine.

The March contract traded last up EUR 4.45 at EUR 70/MWh, while the front quarter stood EUR 4 higher at EUR 49.25/MWh at Nasdaq Commodities, their highest levels since 4 February and 8 February, respectively. 

Prices gained support from drier forecasts for late February and early March, said Sigbjørn Seland, chief analyst at StormGeo

The 10-day outlook indicated precipitation equivalent to 7.2-7.8 TWh of potential hydropower production, which was below previous expectations but still above the seasonal average of 5.4 TWh, according to data from Montel’s Energy Quantified (EQ). 

Temperatures, meanwhile, were expected to range between 0C and 3.8C above normal this week and next week, the data showed.

As a result, the hydrological balance – a measure of reserves stored in reservoirs, snow and soil – should improve from a surplus of 6.9 TWh currently to 10 TWh above normal in two weeks. 

Prices also rose along with the wider energy complex on Russian troops reportedly entering eastern Ukraine. 

“Naturally, oil, gas and coal prices are all rising amid the increased concern that this latest escalation in Ukraine will lower [fuel exports] from Russia below normal levels,” said Seland.

Indirect link

The link to Nordic power is mainly indirect through German power prices, he said, with German power for March rising EUR 12 to EUR 168/MWh on the EEX this morning.

The front-month gas contract on the Dutch TTF hub – Europe’s most liquid – was last seen up EUR 4.90 at EUR 76.75/MWh.

Seland also noted that US president Joe Biden has said that there will be no commissioning of the gas pipeline Nord Stream 2 between Germany and Russia if the former invades Ukraine.

“Now the question becomes if this is regarded as an invasion or defined as something else, which would be a substantial factor affecting the expectations of future gas flows,” he said.

Higher wind output 
Closer in, Seland estimated the Nordic system price for Wednesday would fall significantly from the current EUR 120.66/MWh amid expectations of higher wind power output.

Montel’s AI-based model predicted it would out-turn at EUR 82.50/MWh.

Average Nordic wind power was expected to rise from 7.4 GW today to 13.8 GW on Wednesday, while power consumption was set to fall from 55.8 GW to 54.8 GW, according to EQ data.


Reporting By:
Wilhelm Zakrisson
11:55, Tuesday, 22 February 2022