Volatile spot prices and chilly weather forecasts
influence the market
Fokus week 18 2015
Last week started with new
drops in the Nordic system
forwards but the scenario
changed at the end of the
week and the prices have
now been rising for three
days in a row. Week 17
was also characterised by
the lowest spot prices for
almost a year.
Here and now
Heavy precipitation volumes resulted in new drops in the forward prices
at the beginning of last week. Some
ten day forecasts were more than
three times as wet as the norm but
the volumes later normalised somewhat. As the temperature readings
also fell somewhat below the norm,
price developments turned and we
have now experienced increasing
prices for several days in a row. On
Monday the Q3-15 contract closed at
EUR 22.89/MWh which is EUR 0.44/
MWh higher than the same time last
week. The YR-16 contract is currently worth EUR 27.52/MWh which is
EUR 0.13/MWh more than last week.
Our recommendation
Right now the market is keeping an eye
on an area of high pressure that may
move in across Sweden and Norway
towards the weekend. If the precipitation volumes fall and the temperatures remain below average there
will be potential for another week of
increasing prices. As commodities
could also continue to increase in
price, we recommend hedging now.
Fluctuating spot prices in unsettled weather
For many weeks the average daily
system price has been stable in the
range EUR 24-26/MWh during working
days, but this changed during the
course of last week. On Thursday the
Nordic system price was EUR 22.28/
MWh, which is the lowest Nordic
system price we have experienced
on a working day for six months. The
particularly wet and windy weather
forecasts caused the market to trade
down and the price ended up well below
what we have seen for the last couple
of months. However, the situation
changed at the beginning of this week.
On Monday and Tuesday the Nordic
system price was EUR 29.66/MWh
and EUR 29.29/MWh respectively the highest daily price we have seen
since the beginning of February.
Opinions vary as to the cause of the
sudden increases but the chillier and
calmer forecasts should be the main
reason. The sudden increases in the
spot market were also a contributing
factor to the price increases we have
experienced on the Nordic power
forwards at the beginning of week
18. Here, Monday closed with a
noticeable increase and at the time
of writing on Tuesday it appears to
be moving in the same direction.
Forward
Week 17
Week 18
Difference
ENOMMAY-15
EUR 22.70/MWh
EUR 23.90/MWh
EUR 1.20/MWh
ENOQ3-15
EUR 22.55/MWh
EUR 22.89/MWh
EUR 0.44/MWh
ENOYR-16
EUR 27.39/MWh
EUR 27.52/MWh
EUR 0.13/MWh
SYHELQ3-15
EUR 9.55/MWh
EUR 9.70/MWh
EUR 0.15/MWh
SYOSLQ3-15
EUR -2.48/MWh
EUR -2.88/MWh
EUR -0.40/MWh
Renewed hope for MSR results in increasing CO2 prices.
Forecasts
Precipitation: Following a period
of even higher precipitation
volumes, the Nordic ten day
forecasts are now ”only” around
70% wetter than the seasonal
norm. The rest of this week will
be very wet, particularly in Sweden, while the slightly uncertain
final days of the forecast could
very well indicate that week 19
will be slightly drier.
Even though a group of coal-dependent countries are resisting with all means
possible, it does not appear that the more green energy adaptable EU member
states have given up on the idea of implementing the CO2-reducing MSR plan
earlier than 2021, which has otherwise appeared to be the only possible starting
date for a long time. Signals from the Latvian EU Presidency about wanting to
attempt to get the countries on board with a compromise to implement the plan
in 2019 resulted in the quota price increasing by more than 6% last week, closing
at EUR 7.32/t on Friday, the highest price since February. Negotiations will continue over the coming weeks.
Low gas prices in a well-supplied market
Production and spot: The spot
price has been volatile during
the last week (read more about
this in the article on the front
page). Week 17 was characterised by the lowest weekly price
for nearly a year but the beginning of this week it has been
surprisingly high with prices
close to EUR 30/MWh. This is
due to a combination of chilly
weather and below average
wind power production.
The CfDs
The Finnish CfD for Q3-15 became marginally more expensive during the course of last
week and closed at a price of
EUR 9.70/MWh this Monday. In
Oslo the NO1-CfD for the same
period fell by EUR 0.40/MWh to
EUR -2.88/MWh.
The last couple of weeks have offered increasing oil, coal and CO2 prices but the
gas market has not been able to follow the positive developments in the rest of
the fuel complex. The European countries remain well-supplied and this has resulted in prolonged periods in the last few weeks where supply has been greater
than demand in the markets. On the British NBP exchange, the Winter-15 contract has fallen by approximately 7.5% in the last month and the contract is currently being traded at the lowest price since January. Fears of a renewed Russian/Ukrainian gas crisis are also low, which has contributed to the price falls.
Sales Manager
Peter Lehm
([email protected])
Telephone: +45 8742 6720
Communicative Analysist
Karsten Sander Nielsen
([email protected])
Telephone: +45 8745-6948