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German 2014 Power Advances to Three-Month High on Trend Breach

German power for delivery next year advanced to a three-month high today after breaking through technical resistance.

Electricity for delivery in 2014 in Germany, Europe’s biggest power market, gained as much 2 percent to 38.60 euros a megawatt-hour, the highest since June 5, according to broker data compiled by Bloomberg. The contract traded at 38.50 euros at 4:27 p.m. Berlin time. The resistance level was at 36.90 euros, according to Thomas Randel, a trader at EnBW Energie Baden-Wuerttemberg AG.

“German power is rising after breaking a trend,” Karlsruhe, Germany, based Randel said in an e-mail today. “The contract has now room to rise to 40 euros.”

A slump in electricity demand combined with increasing output from solar and wind helped push the 2014 German power contract down to a record 36.05 euros a megawatt-hour Aug. 6. The contract, a European benchmark, has lost 22 percent over the past 12 months.

The volume of German power traded through brokers slumped 31 percent in August from a year earlier, according to a report today by the London Energy Brokers Association. German electricity demand declined 1.3 percent in the first half of this year, energy lobby group BDEW said last month.

French electricity for 2014 climbed 1.2 percent to 43 euros a megawatt-hour, the highest since April 24, according to broker data on Bloomberg. The contract dropped to a record 41.35 euros a megawatt-hour June 11.

Cold Winter

“A cold start to the winter may well see the end of the down trend” in German power, Gary Hornby, an energy markets analyst at Enenco Group Ltd. in Lytham, St. Annes, England, said today by e-mail. “But it will be difficult to go back above 40 euros a megawatt-hour, which could be a strong resistance level.”

Polish power for delivery next year rose as much as 3.8 percent to 165.10 zloty ($50.63) a megawatt-hour, its biggest jump since start of trade in June 2012, broker data on Bloomberg showed. The 2015 contract surged a record 6.9% to 174.80 zloty a megawatt-hour. The similar German contract increased to 38.05 euros a megawatt-hour.

“I don’t think it’s a trend, in the longer run,” Flawiusz Pawluk, a Warsaw-based analyst at UniCredit SpA, said by phone. “It’s a mix of reasons, including utilities being less eager to hedge output as a vast part of production has been already presold, combined with higher carbon and German prices.”

Carbon Jumps

European carbon permits for December delivery rose as much as 9.9% to 5.02 euros a metric ton on ICE Futures Europe exchange in London. Power can track emissions, which affect production costs.

An indicator of price momentum used by some traders indicates that German 2014 power may be overbought. The 14-day Relative Strength Index of 78.35 is the highest since June 2010 and above the 70 threshold that indicates its increase has been too rapid. The equivalent Polish contract has an RSI of 91.63, a record high, broker data show.

“I don’t think this is a real turnaround in price movement,” Konstantin Lenz, a managing director at Lenz Energy in Berlin and a power market analyst for more than 10 years, said by phone today. “Without positive economic data there isn’t enough of a driver to increase prices.”

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