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Germany/France review: Far curves range-bound as cooler weather lifts prompt

13 Apr 2012 19:30:38 | edem

The German far curve softened early in week 15 on weak gas and general macroeconomic bearishness, before strengthening emissions and gains at the three main European gas hubs saw most contracts finish Thursday's session with a bullish flourish.

The majority of prompt contracts rose as cooler weather and a number of outages at power plants across Germany and France caused the system to tighten.

The German Calendar Year 2013 Baseload began week 15 by ticking lower as far-curve gas contracts shed value on the back of weak oil. The downward trend continued in the following session as macroeconomic gloom triggered further losses on the Brent crude front month.

Contrary to the expectations of some traders, the German benchmark was unmoved by strengthening emissions, which had been a key driver during week 14. Gains of €0.30/tCO2e across Tuesday and Wednesday on the Cal '12 emissions contract failed to filter in to the Cal '13 Baseload, which shed €0.25/MWh over the same period.

Normal service was resumed on Thursday, however, as rising emissions teamed up with firmer gas to lift the benchmark by €0.25/MWh, closing at €51.60/MWh.

On the French far curve, Q3 Peaks gained in value across the three sessions following grid operator RTE's announcement on Tuesday that reservoir levels remained unchanged at 41% fullness - the lowest level seen at this time of year since 2003.

Bullishness on the spot in both markets on Tuesday took some traders by surprise, remarked one source, who added that the market seemed considerably more settled during Wednesday's session.

Forecasts for cooler weather and low output from German renewable sources saw German Day-ahead Baseload deliver at €51.75/MWh on Wednesday, €7.75/MWh higher than where the equivalent contract closed on 5 April.

A second source described the price spikes seen on Tuesday as "very typical for April", owing to the sudden changes in temperature often associated with spring. The source suggested that once temperatures warm up again then Peaks spot values could fall "by around €10.00/MWh" as solar generation picks up. TH

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