Updated: Hungarian June electricity contract at three-year high amid spot price spikes

The Hungarian front-month electricity contract reached a three-year high for a June product on Tuesday as tight regional supply led to spikes on the day-ahead market which filtered down to front-month valuations.

Day-ahead Baseload on the Hungarian and Romanian exchanges closed at €52.83/MWh for Tuesday delivery and €56.17/MWh for Wednesday delivery. Such levels were last seen in February when cold temperatures lifted demand.

On the over-the-counter (OTC) market the Hungarian Day-ahead was last reported trading at €51.00/MWh.

The Balkan region is currently missing key capacity, and will be at least for the rest of this week, such as:

• 700MW Cernavoda nuclear unit in Romania until 5 May

• 539MW Sostanj coal-fired plant in Slovenia until 5 May

• Second 700MW Cernavoda unit will be offline 5 May–6 June

• 470MW Mochovce nuclear plant in Slovakia until 14 May

• The majority of 1.2GW at Serbia’s TENT coal-fired complex offline until 27 May

• 300MW Stanari coal-fired plant in Bosnia until 31 May

• 1GW Kozloduy nuclear unit in Bulgaria until 12 June

There were also reports of outages at another two Bosnian coal-fired plants, the 300MW Ugljevik and 300MW Gacko. Gacko had reportedly returned to the grid on Tuesday but ICIS could not confirm the information.

Supply has been additionally squeezed by forecasts for low wind in Romania for the working days this week and poor regional hydropower stocks.

Bad flow optimisation, relatively high demand and a hint of panic on the market have also contributed to the spikes, according to one regional trader.

The Italian spot market was also bullish with the Day-ahead Baseload price in Italy’s north zone closing at €48.47/MWh on Tuesday. Usually this price is taken as an indicator for the upside potential of Hungarian prices which rarely deliver above Italy.

Bullish prices

The Hungarian front-month Baseload lifted to an intra-day high of €42.25/MWh in the early afternoon, according to trades reported to ICIS. The contract was quoted a bit lower at €41.75-42.25/MWh at market close.

The last time the Hungarian June contract has been this high was April 2014, according to ICIS data.

Week 19 ‘17 was also elevated on Tuesday with the majority of trades changing hands at €44.00/MWh, well above the last reported trade on Friday at €41.00/MWh.

Week 20 ‘17 and Week 21 ‘17 Baseload were trading at €42.50/MWh and €42.00/MWh respectively, pointing to expectations of lower spot prices later in the month.

Outlook

The spikes on the spot were expected to be short-lived with demand set to drop gradually as the week progresses and the weather warms up. Temperatures are forecast to be above average in some parts of Romania, Bulgaria, Serbia and Hungary in the next five days, according to WSI.

Regional hydro availability should also increase.

Flows at the Danube’s Bazias point stood at 5,600 cubic metres per second (cbm/s) on Tuesday, below the 7,250cbm/s monthly average.

Flows are forecast to gradually rise to 7,500cbm/s by Saturday and stay at this level at least until next Tuesday, according to the Romanian Institute of Hydrology and Water Management.

The hydro supply situation in Serbia was also causing less concern, according to one local trader. State-owned utility EPS was neither buying, not selling day-ahead volumes via email tenders on Tuesday, which usually indicates a balanced market.

The Day-ahead Baseload on Serbian exchange SEEPEX stood €6.54/MWh below the Hungarian equivalent on Tuesday.

Serbian hydro stocks have stabilised at 329GWh in weeks 16 and 17, up from 322GWh in week 15, according to the latest available transparency information. However, flows at the Lim river were pointing to a downward trend. irina.peltegova@icis.com