Wet weather forecasts result in price falls
Focus week 11 2017
The hydro-balance is improving, and the
weather forecasts indicate some rain
over the next ten days. Nordic electricity prices have therefore fallen during the
last week.
Here and now
Excess production a topic in the commodity markets
Following a couple of weeks without
noticeable price fluctuations, Nordic electricity prices fell during the
last week. The downtrend was supported by both weather conditions
and the commodity markets, and the
major hydro-balance improvements
and sharply falling coal prices in particular had an impact on the energy
markets. Overall, the Nordic Q2-17
contract ended the week with a fall
of EUR 1.70/MWh, corresponding to
6.5%, and closed at EUR 24.60/MWh
on Monday. The YR-18 contract fell
by EUR 0.70/MWh (3.0%) and ended
the week at EUR 22.95/MWh.
Following several weeks in which the
commodity markets have generally
increased or at the very least remained
relatively stable, the prices of oil and
gas have started falling again and
excess production has once more
become a keyword in the markets, just
as it was in 2016 when the prices were
much lower than they are today. In the
oil market, there was originally a hope
that the OPEC production limitations
would have resulted in increasing
prices, but, following brief positive
developments, the prices have now
dropped to their lowest level of 2017
Our recommendation
We believe that the coming week will
be relatively neutral in the Nordic
energy market. Following the price
falls in the last couple of weeks, the
commodity markets should stabilise around the current level, and the
potential downside is not as large as
what we have previously experienced.
The immediate contracts could experience an increase if the weather
forecasts become as dry again as we
experienced at the start of the month.
so far. A barrel of Brent oil is currently
trading at approximately USD 51.50, a
fall of 8% in one week. While OPEC is
cutting production, extraction in the
USA is increasing and the oil stock
level is currently at a record high. As
such, the OPEC states have not yet
succeeded in pushing the oil prices
up. Prices have also fallen in the coal
market since the start of March,
as China has not yet been able to
make a final decision about potential
production limitations. The price falls
look set to continue until actual news
is announced.
Forward
Wk 10 (EUR/MWh)
Wk 11 (EUR/MWh) Expectation (wk 12)
ENOMMAR-17
28.55
26.45
→
ENOQ2-17
26.30
24.60
→
ENOYR-18
23.65
22.95
→
SYHELYR-18
6.68
6.85
↘
SYOSLYR-18
-0.40
-0.40
→
Brief upturn in the allowance market
Forecasts
Precipitation: The next ten days
look set to be very wet in the
Nordic region. The anticipated
precipitation level for the rest of
this week is expected to be substantially above the norm and
the hydro-balance will continually improve.
The climate and environment ministers of the EU member states met a couple of
weeks ago to approve the new reform of the EU’s carbon emissions allowance
market, and the ministers’ support of the ambitious reform resulted in shortterm increases. Over the course of just one week at the end of February, the quota price rose by more than 15%, but the positive development did not last. During
the last week, the prices have once more dropped to the same level as before the
ministers approved the EU plan, and an allowance now costs only EUR 5/t again.
The optimism in the crisis-ridden market has therefore vanished again.
Falling SRMCs for both coal and gas
Production and spot: The weather for the coming week is characterised by low pressure and
will result in high levels of wind
in the Nordic region. From the
start of next week, the level will
fall slightly. We anticipate that
the average Nordic system price
will be around EUR 29/MWh this
week, which is substantially below last week’s level.
The EPADs
Last week also did not see any
fluctuations in the YR-18 EPAD
for the Norwegian NO1 price
area. It still remains at EUR -0.40/
MWh. In Finland, the YR-18 EPAD
has, however, increased by EUR
0.17/MWh and now costs EUR
6.85/MWh.
Peter Lønbro Lehm, Sales Director
([email protected])
Tel.: 8742-6720
The falling coal and gas prices in recent weeks have also resulted in coal and
gas-based electricity producers now having lower marginal costs for production. The anticipated SRMC for coal production in 2018 is now EUR 30.70/MWh,
while the SRMC for gas is at EUR 32.24/MWh. In this connection, it is also worth
noting that the spread between the two SRMCs is currently relatively low (EUR
1.54/MWh). The spread was nearly EUR 5/MWh only a couple of months ago.
This makes gas-fired production more attractive.
Michael Bendixen, Customer Manager
([email protected])
Tel.: 8744-6790
Communicative Analyst
Karsten Sander Nielsen
([email protected])
Tel.: 8745-6948