Nena News

NORDIC – Curve edges down amid low liquidity

(Montel) Nordic power futures are edging down on Friday in a market short on liquidity and new fundamental signals.

The Q3 contract was last at EUR 125.50/MWh, down EUR 1, while Q4 was down EUR 2.50 at EUR 166/MWh, on Nasdaq Commodities. One exception was July, which gained EUR 4 to EUR 113/MWh.

“That some contracts are adjusting down today doesn’t come as a big surprise, since we had a very strong rise yesterday driven by sharp gains on gas, coal and German power,” said Sigbjørn Seland, chief analyst at StormGeo.

“From a fundamental perspective it also makes sense that July rises and Q4 drops, since in our view the front month is priced too low currently while Q4 is priced too high,” he added.

Liquidity was low, subdued by a mid-summer public holiday in Sweden and Finland, which made it hard to put too much emphasis on today’s movements, said Seland.

European front-quarter gas on the Dutch TTF hub was down EUR 2.38 at EUR 131.78/MWh, while German power for the same period was down EUR 3.86 at EUR 292/MWh.

Both contracts had soared on Thursday after Germany raised concerns over the country’s gas supply due to low flows from Russia over the Nord Stream 1 pipeline.

The weather forecasts for the Nordic region remained drier than normal, with various models predicting rain equivalent to 1.5-3.8 TWh of potential hydropower output compared with a seasonal average of 4.8 TWh, according to Energy Quantified data.

Biggest hydrological deficit
The hydrological balance in the region, measuring potential output stored in reservoirs, soil and snow, was set to decline from 7.5 TWh below normal currently to 8.1 TWh below normal in two weeks, according to EQ.

Most of this deficit is concentrated in southern Norway’s NO2 bidding zone, where spot prices have averaged EUR 225.76/MWh this week, well above the Nordic system price average of EUR 150.67/MWh.

In contrast, Norway’s NO3 and NO4 zones in the central and northern parts of the country have seen prices of only EUR 8.89/MWh on average.

For Saturday, the region-wide system price should come down from the current EUR 128.06/MWh on less weekend demand and reduced wind power output, said analysts.

EQ estimated that average wind power output would drop from 6 TWh on Friday to 4.7 TWh on Saturday, while consumption should drop from 33.3 TWh to 30.2 TWh.

Montel’s AI-based forecast predicted a Saturday system price of EUR 102.95/MWh.

Reporting by:
Olav Vilnes
11:31, Friday, 24 June 2022