Nena News

NORDIC – Front rises as forecasts show brief cold snap

 (Montel) Prices on the front end of the Nordic power curve rose early on Thursday as forecasts showed colder and drier weather conditions over the next 10 days. 

However, the front year contract extended a record low amid a continued sell-off in European coal and carbon markets.

On the front end, the week-ahead contract traded last at EUR 22.50/MWh, up EUR 0.50, while the following week contract was EUR 0.25 higher on the day at EUR 18.60/MWh on Nasdaq Commodities.

“Colder and drier weather forecasts are lifting the front end of the curve,” said trader Peter Dentler at Swedish supplier Telge Krafthandel, noting the cold snap appeared to be short-lived.

“We will see some days next week with a quite tight balance due to lower-than-normal temperatures, and this is priced into the front contracts,” said chief analyst Sigbørn Seland at Nena.

Temperatures in the Nordic region will average between -2.1C and -3.1C over the next 10 days, compared to a norm of -2.3C, according to Swedish forecaster SMHI.

Meanwhile, the forecasts predict rain and snow in Norway and Sweden to provide 1.8-4.8 TWh of potential hydropower output in the period, compared to an average of 4.2 TWh, it said.

The day-ahead contract last traded at EUR 23.50/MWh, compared with the current session’s system price of EUR 20.55/MWh.

Seland attributed the higher price to expectations of rising demand with a drop in temperatures. Yet Dentler said the system price for Friday could settle below EUR 21/MWh as demand generally wanes ahead of the weekend.

Back end slumps
Further out, the front quarter contract last traded at EUR 15.22/MWh, up EUR 0.02, while the 2017 contract was last seen at a record low of EUR 16.35/MWh, down EUR 0.15.

“The long end of the curve is pulled down by marginal costs [for coal fired generation] which are falling on a daily basis. The German market is also very bearish, and we have a healthy resource situation in the Nordic which adds additional downward pressure,” Seland said.

The 2017 API 2 coal contract was last seen at USD 36.65/t, down USD 0.34.

Seland also cited weaker EU carbon prices for contributing the bearish sentiment in Nordic power.

“The CO2 prices have almost halved since the beginning of the year, and I would not rule out a further 50% drop,” Seland said.

“If the CO2 price halves once again the 2017 and 2018 [Nordic power] contracts could drop to EUR 15/MWh. However, this requires an oil price down towards USD 20/bbl and coal prices around USD 30/t,” he added.

The December 16 EUA contract last traded at EUR 4.72/t, down EUR 0.17, on the Ice exchange, after hitting an intraday low of EUR 4.62/t, the lowest level since 31 March 2014.

Gert Ove Mollestad
11:33, Thursday, 11 February 2016