Short-term Nordic power prices will come under pressure during the coming week, with strong renewables and milder temperatures set to soften settlements.
With week 17 at €30.50/MWh at Thursday’s close, a premium over day-ahead prices both on Wednesday and Thursday, selling the front-week and buying on the day-ahead market in delivery could prove profitable.
Spot prices fell markedly towards the end of the week to Thursday 20 April, on forecasts for a sharp increase in wind output out to Wednesday 19 and Thursday 20 April.
Day-ahead settlements in the Danish and Swedish pricing zones were particularly exposed to the forecasts, due to a high proportion of installed wind capacity in the two countries’ generation mixes.
Wind is set to continue to be strong in Denmark and Sweden over the weekend and into the start of week 17, according to latest forecasts from ICIS analysts.
Further losses in the Danish and Swedish zones will bring the overall Nordic system price – an average of all the region’s individual pricing zones – lower over the period.
Spot prices across the region will also be pressured by forecasts for milder weather in the coming seven days and the reduced demand from electric heating that will result.
Temperatures will average 2°C below seasonal norms throughout the period, according to forecasts from meteorologist WSI.
This compares to the previous week, when temperatures lingered up to 4°C below average for the time of year.
Further downside for the Nordic power market could come from the region’s hydro stocks, which are set to continue to improve over the coming week.
Reservoir levels – a key driver of the front-month contract in particular – drew closely in line with levels seen in recent years over the past week, as strong snow and rainfall eased strained stocks. There was however no front-month settlement data for the Easter weekend available (see graph).
According to latest figures from the Nord Pool exchange on Wednesday, hydro stocks stood at 30.3% of their total capacity on Monday – a week-on-week decrease of just 0.7 percentage points, which was quite a small drop for the time of year.
Reservoir levels are now 5.8 points below where they were at the same time last year and just 0.8 points lower than 2015.
This represents a vast improvement from the very start of 2017, when dry conditions saw stocks languishing 15.5 percentage points below the previous year.
Forecasts from WSI show continuing strong precipitation across the region over the coming seven days, particularly in the south, where much of the hydro capacity is concentrated.
Data from trading house Energi Danmark suggests that strong rainfall will push hydro stocks into a surplus of 5TWh in two weeks’ time.
Later-dated contracts on the Nordic market remained relatively stable over the seven days to Thursday, with little fundamental direction coming from key European commodities.
The outlook for the Nordic curve remains neutral over the coming week, with the range-bound European coal benchmark unlikely to offer much influence. firstname.lastname@example.org