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Netherlands: Bearish coal prices pull electricity curve lower

04 May 2012 19:15:12 | edem

A combination of bearish fuels forced far-curve contracts on the Dutch wholesale electricity market downwards during week 18. Meanwhile, the spot contract made strengthened as cooler weather and bullish gas supported contracts.

Far-curve contracts were bearish throughout the week, taking their cue from falling German far-curve prices, which were heavily pressured by the bearish European CIF ARA coal market.

The downward momentum gathered pace as the week progressed given the weakness on the TTF gas far curve and the Brent crude oil market. Bleak macroeconomic data for the Eurozone added to the bearish mix.

Pressured by falling fuel prices, the Dutch Calendar 2013 Baseload shed €0.40/MWh week on week. Traders said that market liquidity was difficult to come by with national holidays across Europe on Monday and Tuesday hampering trading volumes.

The Dutch Cal '13 Baseload extended its premium to the German Cal '13 Baseload contracts by €0.45/MWh over the week to €1.25/MWh with German prices falling faster than their Dutch equivalents.

The majority of near-curve natural gas contracts followed their far-curve counterparts downwards with the exception of the June '12 Baseload, which recorded a week-on-week gain of €0.50/MWh because of strong spot prices.

Although the curve displayed continued weakness during week 18, one trader felt the bearish sentiment could be near the end. "Levels are fairly attractive at the moment. We might see some buying at these levels, which might support prices," the trader said.

Strength on the prompt was derived from cooler weather forecasts, which lifted potential power demand while the Dutch power and gas systems tightened, traders said. On the supply side, planned maintenance at several Dutch power plants shortened the power system and buoyed spot contracts too. Furthermore, an outage at Norwegian gas processing plant Kollsnes early in the week, temporarily lifted gas prices, which also fed into power.

The combination of market signals helped to lift the weekly average of the Dutch spot contract trading on energy exchange APX-ENDEX to €48.73/MWh compared with the weekly average of €42.63/MWh during week 17, a difference of €6.10/MWh.

The Dutch and German markets were prevented from being coupled during week 18 because of the strong TTF gas prices.

However, the Dutch premium to its German counterpart was partially limited by forecasts of poor German wind and solar production early in the week. On average, the Dutch premium was €7.00/MWh.

Dutch grid operator TenneT announced that an average of 72.7GW of capacity was forecast to be available on Monday, falling to 72.6GW on Tuesday. CR

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