Continental review: Cold drives bulls into the front week forwards
The Week-ahead contracts on the French and German prompts moved in line as continuing cold weather forecasts drove traders to the buy side. On the far curve, the German Calendar Year 2011 Baseload once again regained the €50.00/MWh level, but then dropped again later in the week.
Freezing temperatures, forecast to continue well into next week, pulled the French Week-ahead Baseload up by 25.6% from Monday to Wednesday, gaining €12.75/MWh. However, the contract started losing ground on Thursday as traders suggested it was overvalued.
"The OTC market got slightly ahead of the weather yesterday," one participant told ICIS Heren.
Data from French grid operator RTE published on Thursday showed temperatures through the next seven days are set to fall as far as 7.8°C below the seasonal average, but traders suggested people were pulling back bids, after the market overreacted in Wednesday's session. The contract closed at €60.25/MWh in Thursday's trade, €2.25/MWh lower from the previous session.
German Week-ahead Baseload gained 9.3% Monday to Thursday, gaining €4.15/MWh.
On the far curve, German Cal '11 Baseload broke the €50.00/MWh support level on Wednesday mirroring rising gas prices, but fell again later, following bearish sentiment on the market. Falling coal and carbon emissions pulled it back down to close at €49.55/MWh on Thursday, at €0.05/MWh below its Monday close.
Traders predicted the contract was still trading high and could fall lower. "Friday marks new lows. I do not see it back up over €50.00/MWh. I think in the first move we will test the lows of €48.80/MWh level, but it could go further in the long run," one trader said, pointing out the trend on Cal '11 Baseload has been bearish since May and this continued. ICIS Heren data shows the contract traded at €59.80/MWh on 8 May 2009 and has been gradually falling since.
The French Cal '11 Baseload, which also peaked on Wednesday, lost a marginal €0.10/MWh Monday to Thursday and closed at €51.50/MWh. MU
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