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Germany/France: German electricity far-curve resumes downward trend

11 May 2012 20:24:20 | edem

Following the slight technical rebound seen on Wednesday and Thursday, the German electricity far curve resumed its downward path on Friday, weighed down by a bearish fuels complex. High predicted levels of renewable generation coupled with a national holiday on 17 May ensured prompt direction was largely bearish.

The German Calendar 2013 Baseload had almost cancelled out gains made over the past two sessions shortly after 08:00 hours London time, at which point it was reported trading at €49.45/MWh.

Traders contacted mid-session pointed to weak fuels, particularly coal and gas - as the primary bearish factors, although late gains on oil saw the whole complex regain some lost ground, which in turn limited day-on-day losses on the benchmark power contract to just €0.05/MWh.

One trader said in the absence of any dramatic news lifting the price of oil, which would filter into gas and subsequently power, Cal '13 Baseload, would likely continue to test new lows in week 20.

However, a second source disagreed, saying the Cal '13 Baseload could tick up slightly in coming sessions.

The second source said that with the national holiday many market participants will be away from their desks for at least two days, so those in the office may attempt to use the limited liquidity to their advantage and close out any short positions.

On German Peaks, July and Q3 '12 were reported trading before 10:00 hours, but were assessed higher than their traded levels owing to gains made by the respective Baseload contracts later in the session.

On the French far curve, most Baseload contracts ticked lower in line with their German equivalents. Those Peakload contracts that failed to trade were assessed in line with day-on-day changes on the corresponding Baseload contracts.

Prices on prompt contracts in Germany look set to remain low in coming sessions, as an influx of solar generation should ensure the market is well supplied.

According to Eurowind's spotrenewables data, solar production is set to tip 9GW each day between 14-16 May.

A slight downward revision in forecasted temperatures for Week 20 was said to have had little impact on the week-ahead contract, because conditions should still not be sufficiently cool to trigger a surge in demand from central heating.

Conditions in Germany are predicted to hover around 2ºC below seasonal norm from 14-18 May, according to forecaster WSI, while French grid operator RTE forecasts similar conditions across the border.

One French trader said he felt the current low level of nuclear generation could add risk premium into prompt contracts, as any unplanned outage could see the system tighten to a critical level.

Others were more relaxed, noting the high level of hydro generation should prevent any undue system tightness, and that therefore prices should remain relatively stable. TH

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