CEE: Curve bubble deflates on new Greek concerns
Strong earnings notched up on central and eastern European curves throughout the week started to lose steam on Wednesday as fresh concerns over Greece and Portugal's fiscal woes sent jitters across international markets.
Regional traders said a correction was overdue in order to deflate a bubble that had been forming for the last month, and which, they said, had no support in real economic terms.
Taking the cue from tumbling stocks on both sides of the Atlantic and dropping crude prices, the Calendar Year 2011 Baseload contract in Poland and Czech Republic lost ground on Tuesday, while the Romanian and Hungarian equivalent products stayed range-bound.
In contrast, quarterly and front month values gained ground day on day, with the Serbian May '10 Baseload contract gaining as much as €1.10/MWh, being assessed at €39.85/MWh
"People had been buying as if there was no tomorrow," one trader active on the Czech market said. The buying spree had to come to an end and the fresh concerns over Greece have sent a warning signal that we are not through the worst yet and that prices cannot be kept high artificially."
The source said the bullish run on the contract had been prompted by banks which had been snapping up large Cal '11 Baseload volumes.
"They have been repeating the spiking patterns we saw before the onset of the recession in 2008.
"Traders sit in front of the screens and wonder has anything changed in the balances of countries? No. Oil has gone up but it's being kept up by the Fed's [US Federal Reserve] monetary policy. So what is it that keeps the prices this high? My answer is pure manipulation from the banks."
In Poland, traders reported bids above the zlotych 200/MWh mark. But one participant described them as "panic."
Farther east, Romanian dealers were waiting for the contract to be lifted on the back of other markets.
"Romanian Cal '11 seems to have hit the New Lei 180 mark, so everyone is waiting to see if bullish trends on the other markets will break this level," one market source commented.
The Hungarian equivalent stayed range-bound, but it was the Calendar Year 2012 Baseload contract that raised interest.
"There is demand for Cal '12, but no sellers," a trader said.
Quarterly contracts attracted fresh interest, with the Czech Q3 Baseload product gaining another €0.10/MWh day on day, being assessed at €45.60/MWh.
But one trader said the front quarter product has been kept high artificially for the last few days, gaining €2.45/MWh from one session to another at the beginning of the week.
"What happened in the economy from Friday until Monday to justify the €2.45/MWh gain?" the participant said.
Meanwhile, the Q1 2011 Baseload product continued to attract interest in Romania, as a total of15MW changed hands on Wednesday.AS/SR
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