Nena News

NORDIC – Forwards rise on dry weather outlook

(Montel) Nordic power prices edged up on Friday amid expectations of declining hydropower storage from drier-than-normal weather over the next few weeks.

The April contract last traded at EUR 18.85/MWh, up EUR 0.40 from the previous day’s close on the Nasdaq Commodities exchange, while the front quarter contract last changed hands at EUR 17.10/MWh, up EUR 0.14.

“Today’s movement could be explained by a drier four-week weather forecast,” said analyst Sigbjørn Seland at Nena, pointing to a further reduction in hydropower storage in reservoirs, snow and soil – which had weakened by an equivalent of 8-9 TWh over the past three weeks.

Scandinavian weather will be drier and milder than normal over the next two weeks before temperatures drop towards the end of the month, according to Swedish forecaster SMHI.

Market participants also attributed the buoyant tone to recent gains in fuel markets.

“It seems that the market thinks that fuel prices, especially oil, has bottomed out, and this positive sentiment is pulling up power prices,” said analyst Gunnar Aronsen at Trønderenergi.

The Brent front month contract has risen from its 20 January low of USD 27.10/bbl, a near 13-year low. It last traded at USD 37.17/bbl on the Ice platform.

And the short run marginal cost for coal fired production in Q2 has increased by EUR 0.3 to EUR 23.01/MWh over the past week, according to Montel data.

Norwegian reservoir surplus
However, Aronsen pointed to a healthy surplus of water in Norwegian hydropower reservoirs.

Norwegian reservoirs were 57.7% full at the start of this week, well above the median of 52.2%, according to Nord Pool figures.

The system price has averaged at EUR 23.47/MWh so far in March, while the future contract for March went to delivery at EUR 19.55/MWh earlier this week.

“I would have expected a system price down towards EUR 18/MWh or even lower due to the exceptionally high reservoir levels,” Aronsen said.

The day-ahead contract last traded at EUR 19.50/MWh, compared to the current session’s price of EUR 23.78/MWh.

Seland predicted the spot to settle around EUR 19.50/MWh, as consumption would fall in the weekend and Nordic wind power production was expected to increase from an average of 2 GW on Friday to 3 GW on Saturday.

Further out, the 2017 contract last traded at EUR 17.60/MWh, up EUR 0.20. The contract has traded within the EUR 17.10-17.85/MWh trading range since 18 February.

 

Gert Ove Mollestad
gert@montel.no
11:57, Friday, 4 March 2016