Colder weather forecasts for week 16 compared with the preceding week gradually lifted prompt contracts throughout week 15, a situation that looks set to continue after the weekend.
With delivery of the front-month contract approaching, any sustained uplift on the prompt is likely to filter through to the May '12 Baseload contract.
Beyond this, traders bemoaned the lack of curve drivers in week 15, which could see any prompt strength ripple down as far as the seasons should the situation repeat itself in week 16.
Further out, a two-day bull run on the curve ran out of steam on the last day of week 15, indicating that participants will again look to fuels and carbon for direction, as opposed to heeding any technical indicators.
Should power traders wish to exchange contracts on the basis of electricity fundamentals however, concern over whether LCPD-related capacity losses have been adequately priced into curve contracts could remain a bullish factor in the back of participants' minds.
National Grid had its average peak demand forecast pegged at 43.2GW, falling substantially to 41.3GW in week 17. This would indicate that any bullishness seen as a result of the fall in temperatures during the week ahead is likely to be retraced towards the latter half of the week.
Since the quiet Easter period has come to an end, the German and French far curves might attempt to break out of the range-bound nature they have been stuck in recently. The German Calendar Year 2013 Baseload contract had been moving in a €51.00-52.00/MWh range for the last two trading weeks.
One of the key indicators to give the far curve a sense of direction could come from economic news. Traders might look out for the German Ifo Institute business-sentiment indicator on Friday to shed light on the state of the economy.
On the near curve, the rally seen on the German front month might run out of steam as temperatures are forecast to rise again by mid-week, taking away some of the recent bullishness coming from the demand side.
The near curve is likely to take direction from the carbon emissions market and or coal rather than from bullish gas prices.
In addition, the shortage on the supply side because of planned maintenance works and unplanned outages recently is seen as easing. Also a combined capacity of 1.7GW of lignite and gas power plants will become available again at the beginning of the week.
In France, temperatures are forecast to stay cooler for longer than in Germany, which should lend some support to prices. France also had two unplanned outages on Friday, which could add further strength. JS/MD
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