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Germany/France: Far curve lacks direction, near curve supported by tight supply

13 Apr 2012 21:32:23 | edem

The German and French far curves drifted sideways on Friday with a degree of support coming from the market for carbon emissions. The near curve showed more life, gaining on the continued supply tightness following a number of unplanned outages on top of planned electricity plant maintenance works.

The German Cal '13 Baseload contract remained flat session on session, closing at €51.60/MWh. The contract lacked direction and traded in a €0.25/MWh range during the session. "It's been pretty dead," said one source. "The little upwards move probably came on the back of carbon," he added. The benchmark Dec '12 EUA rose slightly by €0.10 day on day.

However, the source considered that the front year of the far curve will break out of the sideways range it had been trading in over the recent weeks as the quiet period around the Easter holidays comes to an end.

He predicted that the German Cal '13 and Cal '14 Baseload contracts would remain in contango. The two contracts first came into contango on 4 April when the front year dropped more heavily than the further out contracts because of bearish sentiment in the carbon emission market.

"I never thought that a backwardation was justified," said the source. "Both coal and CO2 are in contango," he pointed out. "It was only because of a slight backwardation in gas that power was also in backwardation."

The French Cal '13 Baseload did not trade on Friday, and ICIS assessed it unchanged day on day at €52.05/MWh in line with its German counterpart.

On the German near curve, prices were supported owing to a loss of nuclear power capacity in addition to forecasted low wind and solar-production bolstered prices. "We are a bit short (on production)," commented one trader.

The German May '12 Baseload contract gained €0.40/MWh day on day to close at €41.85/MWh.

E.ON's decision to bring forward the planned maintenance period of its 1.4GW Brokdorf plant to last from 12 April until 25 May instead of later in the year, continued to supported prices.

Even though next week will see the return of 400MW of lignite-fired plant capacity, the 1.36GW Grohnde nuclear plant is out for maintenance until 22 April.

This is followed by the planned outage of the 1.75GW Grafenheide nuclear plant which is due to be off line from 22 April to 15 May.

Despite the day-on-day rise, one source considered that traders seemed reluctant to buy into the May and June contracts. After opening higher, the contracts moved further up only by a little.

The German prompt was also bullish on the outlook for low wind and solar power production. Solar production is tipped, declining from an hourly peak average of 8.8GW on Monday to 4.8GW on Wednesday, the data shows.

The French May '12 Baseload contract gained €0.35/MWh day on day to close at €40.25/MWh. MD

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