Weather-Trade – 23.03.2021 at 14:15

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 12 and 13
  • WRMe-WDC effect looks weaker thus WWW’ish into next week forecasts is likely

• Statistics – normal vs WRM+PV/Jet

  • Strong PV, PV core west, and WRM-CWW signals suggest accumulated W(C)WW 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”

  • Next week WRM(e)-CWW + Observed WWW will cause bearish weather pressure not seen for some time
  • EC opr, control run and ens mean signals shows that bearish weather-thinking looks “safe”

• Hydbal/Inflow/Wind/Temp/Flow

  • There is a bearish risk into the week with both observed WWW and also WWW forecasts for NC+DEU, especially into the weekend and into the start of week 13
  • This supports higher inflow and hydbal and thus lower water values into late week 12, but now also into week 13

• NC SYS price vs. futures

  • SYS price is strong and needs observed WWW + WWW forecasts to come down significantly
  • As for now, we need a bearish correction into the week to justify holding bearish positions, that can come within Friday

• DEU SYS price vs. NC

  • Into late week 12 and the start of week 13 both NC+DEU sees higher wind and thus SYS price should come down
  • But the overall outlook is that DEU is higher than NC and thus a bull support
  • Thus, NC need stable W(C)WW to hold SYS price far below DEU

• 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) into week 13 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 late week 12 and 13…
  • Thermal and Carbon
    • Vaccine concerns and profit-taking and modest DEU WWW forecasts do support a correction into week 12+13

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 12

  • Await WWW response in the market later into the week

• Week 13

  • Profit-taking: If down into week 12 then profit-taking earlier
  • Look for the timing of long positions into late week 13

• Week 14

  • More Long positions, but profit-taking within week 14
  • New CWW periods could develop in forecasts for late week 14 and 15-17

• Hedging

  • The WRM-WWW period week 12-13 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 12-13
  • But there is a dry potential for late week 13 and week 14 forecasts suggesting a bull correction into week 14

Weather-trading and hedging: medium-range

• (This section is under development/research)
• As for now the outlook for March+April is accumulated moderate W(C)WW
• For now, we cant fall off risk for some solid wet and windy periods until the start of May
  • => 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 lasting 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, but resent WRM data and research shows that we can’t call off solid wet and windy risk until we see the effect of the FSW on surface levels some time into the first part of April

• 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…