Nordic February Power Rises as Spot Price Surges on Cold WeatherTorsten Fagerholm
Nordic electricity for February advanced, rebounding from yesterday’s record low as forecasts of lower-than-average temperatures caused tomorrow’s price to jump.
The February contract rose as much as 1.4 percent. Power for delivery tomorrow was 16 percent higher in today’s auction on the the Nord Pool Spot AS exchange than in yesterday’s auction for power today. Low temperatures tomorrow in Oslo may be minus 16 degrees Celsius (3 Fahrenheit), according to CustomWeather Inc. data on Bloomberg. That compares with a 10-year average of minus 8.
“The spot price for tomorrow is much higher than the one for today, which is a bullish sign, and adds to the technical recovery from yesterday’s price plunge,” Martin Brink, a trader at Goeteborg Energi DinEl AB, a Swedish power-trading company, said by phone from Gothenburg. The increase in the spot price was driven by cold weather, lower wind power output and a rise in German prices, Brink said.
The month-ahead contract rose as much as 1.4 percent to 42.10 euros ($56.01) a megawatt-hour and traded at 41.8 euros as of 3:29 p.m. on Nasdaq OMX Group Inc.’s energy exchange in Oslo, after falling as low as 40.85 euros yesterday. Power for delivery tomorrow will cost 54.24 euros a megawatt-hour on average, as set in today’s auction.
Electricity use in the Nordic region tracks temperatures during winter months, with demand surging and electric heating increasing when temperatures drop. Forward contracts frequently track movements in prompt prices.
Water resources available for hydropower production, which meets half of the region’s electricity demand, may drop to a deficit of 15 terawatt-hours over the next month, SEB AB, Sweden’s third-largest bank, said today in an e-mailed research note. The Nordic region had a surplus of 9 terawatt-hours at the end of November, according to Markedskraft AS data on Bloomberg.
“This is an excellent illustration of just how rapidly the Nordic power system can shift from one extreme to another,” Mats Forsell and Mats Hedberg, commodity traders at SEB, said in the report.