Nena News

GERMAN – Cal 16 hits one-week high amid firm coal prices

(Montel) The German benchmark Cal 16 power contract rose to a one-week high on Friday morning, as rising coal prices boosted the marginal costs for power production.

The baseload contract opened at EUR 30.55/MWh this morning, its highest level since last Friday, and was last seen traded at EUR 30.45/MWh, up by EUR 0.15 from Thursday’s close.

“Higher fuel prices and a weaker euro in relation to the US dollar has led to higher marginal costs [for conventional power generation], and that’s probably what’s lifting the curve now,” analyst Sigurd Lie at Oslo-based firm Nena told Montel.

An Italy-based trader shared a similar view, saying that “the Cal 16 is getting lifted by the strength in the coal markets”.

Coal prices have risen in line with stronger oil prices, “and considering Brent gained 10% yesterday… it makes sense [that coal prices are up now]”, the trader added.

In the coal market, the API 2 contract for 2016 was last seen traded up USD 0.35 on the day, at USD.53.40/MWh on the Ice exchange, having risen by more than USD 2 since it hit a record low of USD 51.20/t on Wednesday.

The front-month contract for Brent North Sea oil rose by USD 4.42 on Thursday, closing at a nine-day high of USD 47.56/bbl. It was last seen trading down USD 0.53 on the day, however, at USD 47.03/bbl.

The euro has weakened by around 0.6% in relation to the US dollar since midday on Thursday – further increasing the import costs for dollar-denominated fuels such as coal and oil, and EUR 1 was last seen at USD 1.1294.

Lower wind lifts front week
Further in on the German power curve, the week-ahead baseload contract last changed hands at EUR 33/MWh, up EUR 0.80 on the day.

Nena’s Lie attributed the rise in the front week to expectations of a decline in wind power production next week.

Electricity consumption will be largely unchanged – or possibly lower – then, however, because temperatures are also expected to fall, leading to less power demand for cooling, according to the analyst.

German wind power production is expected to average 4.2 GW next week, while temperatures are forecast to drop from 24.4C on average on Sunday – 7.3C above the seasonal norm – to 15.5C by next Friday, Nena data showed.


Reporting by:
Iselin Rønningsbakk
11:25, Friday, 28 August 2015