Stunted demand for electricity combined with over-supplied fuels markets to pressure baseload index values for delivery in June at Europe’s largest electricity markets, ICIS monthly index figures show.
Meanwhile markets in southern and eastern parts of Europe displayed less exposure to consumption patterns, finding bullish support in the shape of supply disruptions to offset the weak demand-side driver.
The geographic split showed more supply-side resilience in the major markets, backed by a more diverse generation landscape. This has led to the lowest monthly index value for more than seven years in Europe’s largest power market, Germany.
Fundamentals weigh on markets
The UK baseload index for June ’14 outturned at £39.741/MWh, a monthly decline of 5.1% compared with May ’14.
Downward power movements largely stemmed from falling prices at the NBP natural gas hub on the back of an oversupplied gas market, with strong supply due to be delivered to UK ports in the form of LNG, while at the same time the country will be unable to export excess gas between 11-26 June because of an interconnector outage.
Year on year value was down a substantial 18% from £48.578/MWh, reflecting the fundamentally weak outlook at the NBP going into the summer months.
Traded volume for June ’14 Baseload was 7.6GW, down 23% from the preceding month. Volumes were 18% below levels seen in May ’13.
The German monthly index for June ’14 outturned at €29.719/MWh, the lowest outturn of any monthly index on the country’s market since April 2007, as production from renewable sources continued to eat into value at Europe’s largest electricity market.
The historically low outturn comes despite buying interest seen on the June ’14 product as reduced conventional plant supported spot prices on days with relatively low wind power generation during May, a pattern which led some traders to cover short positions for June, on grounds it could continue.
Month on month, the index value was broadly flat. Year on year it outturned 7.8% lower, reflecting a gradual decline in German power prices on the back of high renewables generation.
Traded volumes on the German June ’14 Baseload contract declined 40% month on month to 18GW. This was a third lower than a year previous.
The French monthly index for June ’14 outturned 2.9% lower month on month at €27.733/MWh. Similar to its German counterpart this was the lowest outturn for a monthly index since April 2007, and also the lowest June index outturn since 2004. Year on year, the June index outturned 7.1% lower.
Reduced nuclear power plant availability in combination with relatively subdued renewable power generation provided some support to spot prices, the market continued pricing in a more balanced supply and demand picture for the month ahead.
Traded volumes in the French June ’14 Baseload contract more than halved to 3.5GW from 7.8GW for the May ’14 front month contract. Year on year, traded volume was down 25%.
Supply disruptions support southern and eastern regions
In Italy, the index for June ’14 outurned at €46.945/MWh, a 6.9% increase from the previous month. The month-on-month rise was helped by a high spot price during May which lifted the front month, as planned maintenances took a number of thermoelectric power plants offline.
However the June ’14 Baseload index tumbled by 23% year on year. In fact, June ’14 marked a new low for a June index since ICIS started calculating it in 2011. This was in line with the year-on-year performance of the monthly indices so far this year, all of which have out-turned at historic lows.
Traded volumes were down 17% compared with May ‘14 and 41% against June ’13. The total, at 900MW, was the lowest monthly traded volume seen since September ‘13.
The Czech June ‘14 index value edged up by 0.8% month on month to €29.935/MWh. Year on year it declined 1%.
Czech spot prices were supported by supply shortages in the southeast region in May, delivering at a very close spread to the German equivalent of an average €0.09/MWh. As a result, the Czech front-month discount to Germany averaged €0.04/MWh in May, compared with €0.185/MWh in April.
Traded volumes were stable from the previous year, with 405MW changing hands compared with 420MW for June ‘13. However, month on month liquidity dropped 36%.
The Hungarian June ’14 Baseload remained relatively stable with the index value at €38.387/MWh, down 0.5% from the previous month. This was 16% higher than that of June ’13.
While in April a bullish prompt and falling regional hydro levels had warranted a risk premium on the front month, the emergency flood situation in Serbia increased demand for imports from surrounding countries in May, including Hungary.
Traded volume for the front month dipped slightly in May to 1.97GW from 2.2GW in April, but was 210MW higher than for June ‘13.
In Poland, continuing a trend from April, a high spot price in May due to power plant outages kept the front month index value stable month on month. It inched down 2.5% to Zl 168.20 (€40.60)/MWh from Zl 172.458/MWh
Traded volume declined 29% to 255MW from 360MW the previous month. Year on year, the monthly index for June ’14 was 15% higher than the outturn of June ’13.
Trade volumes were almost three-time higher in 2014 compared to a turnover of 90MW in 2013. ICIS staff