Weather-Trading – 19.03.2021 at 12-14

Short-range (front months:1+2 and front Quarter)

• WRM(e)+PV/Jet+SRA

  • WRM(e)-CWW effect is seen in the last runs and thus looks to effect forecasts into week 11 and 12
  • WRMe-WDC effect looks weaker thus WWW’ish into next week forecasts

• Statistics – normal vs WRM+PV/Jet

  • Strong PV, PV core west, and WRM-CWW signals suggest accumulated CWW and that massive low-pressure can develop and thus we are facing the outer edge of the CWW-statistic
  • Thus, March and April could see a surplus of 9-11 Twh precipitation if PV stays west
  • However, its not expected to be stronger observed WWW/CWW until late March and into April limiting the bearish effect of WWW for now

• Volatility forecasts – “strategy”

  • The WRM(e)-WDC effect looks weaker and thus small bearish position over the weekend looks realistic
  • Next week WRM(e)-CWW + Observed WWW will cause bearish weather pressure not seen for some time

• Hydbal/Inflow/Wind/Temp/Flow

  • Into next week there is a bearish risk with both observed WWW and also WWW forecasts
  • This supports higher inflow and hydbal and thus lower water values into week 12

• NC SYS price vs. futures

  • SYS price is strong and needs observed WWW + WWW forecasts to come down significantly
  • As for now the bearsih risk is in forecasts only but could be seen over the weekend also for SYS price observed and also outlook/water values

• DEU SYS price vs. NC

  • S-NO and S-SE/DK shows a bull potential for SYS-price since DEU keeps being higher than NC and there is no solid WWW regime for DEU into late March
    • Next week we could see the higher wind in DEU forecasts that could pull DEU down
  • We have seen that NC is strong when DEU collapse during strong windy days so for a signeficant bearish impact we need NC+DEU in a “lasting” CWW setup
    • A test of the is seen into week 12

• NC spread to DEU

  • As long as Hydbal is below 7-8 Twh surplus DEU prices will be a bull motivator during dry and calm days/periods
  • But obs + forecasted Hydbal could get up to a surplus of 7-9 Twh (Refinitiv, NENA the same, EQ Energy are about 5 twh higher) and that will be a bearish pressure

• Fundamental market models and thermal-carbon

  • Futures vs. market models
    • Market models support current prices and show a bull potential
    • That can change into week 12
  • Thermal and Carbon
    • Vaccine concerns and profit-taking and modest DEU WWW forecasts do support a correction into week 12

Weather-trading and hedging: short-range

(Trading will be done stepwise and per step, we need profit on each step and a confirmed WRM+PV/Jet analysis. If no profit awaits confirmation or close positions. Portfolio: 60 MW monthly (1-3) and 20 MW front quarter)

• Week 11

  • Profit-taking Wednesday successful
    • Sell 5 MW April

• Week 12

  • Await WRMe-WDC effect over the weekend and evaluate PV and WRM outlook
  • If solid CWW setup seen into April new bearish positions
    • Sell 5 MW
    • Profit-taking Friday

• Hedging

  • The WRM-WWW period week 11-13 will lower prices, and thus if hedging is planned to be carried out during this timeperiod it should be down prior to the WRM-WWW period into week 11-13

Weather-trading and hedging: medium-range

• (This section is under developemnt/research)
• As for now the outlook for March+April is accumulated CWW
• Depending on the FSW and its effect new strategies will be made

• Timing of hedging – medium time frame

  • The gap between NC and Germany is too large, and even if prices come down to “panic-mode” in shorter periods, the main outlook up to summer does not support a collapse and thus, we could see more bull NC prices later on
    • 1 of Oct the UK cable is 100% operational, and in 2022 the Nordlink cable increases its effect
    • =>, as we have seen, there is a bull potential on SYS price, even when NO has almost 100% reservoirs, in that SYS price went mega bull as soon as inflow and wind came down below normal (week 48, from 1,5 to +20 Euro…)
    • Panic-mode looks to be related to shorter periods when we see massive wind and inflow in NC, especially when DEU follows up with strong wind. For May-June massive WWW is not likely…

• Correction of portfolios

  • Especially if we see accum dry up to June that will be needed since then the Gap between NC and Germany will be less => hedging prices are about  28-30 Euro for large companies
  • Into the winter new UK cable and low SE nuclear power production, as seen this winter, has strong bull potential during CDC periods regardless of Hydbal as long as inflow, wind and temps are low…