Weather-Trading – 26.03.2021 at 10:38

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

• WRM(e)+PV/Jet+SRA

  • Into week 13 there looks to be a CWW potential in forecasts as what is seen now
  • Thus, the weekend risk is CWW

• Statistics – normal vs WRM+PV/Jet

  • Normally March-April is not that wet and windy (+/- 5 Twh) per month
  • Sum March-April shows that the wet risk is in April
  • Even a stable WRM-CWW signal for April does not mean that April will be stable wet, windy and cold but that accumulated will April be wet and windy
  • PV supports an outer edge of the normal CWW period but late week 13 and into week 14 WRM-WDC suggest a shift to a dry and calmer outlook

• Volatility forecasts – “strategy”

  • Predicting stable weather trends in April is harder and natural variability causes more shifting outlook
  • Thus, only in the strongest WRM days should WRM signals be used
  • As for now Mon-Wednesday(Thursday) week 13 has peak CWW forcing
  • Normally March and April is not that wet and with a Hydbal at a deficit of about -2 TWH a wet period will have limited bearish effect

• Hydbal/Inflow/Wind/Temp/Flow

  • A CWW path in April results in colder temps as seen in forecasts
  • That supports controlled Hydro production and calm melting
  • Thus, a CWW April with current Hydbal is not that bearish for April and modest higher Hydbal will be more bearish further out on the curve
  • We need warmer temps to get SYS price down and that is not likely until later into April when the normal-2Dgc is high enough…

• NC SYS price vs. futures

  • SYS price is strong and needs to be observed WWW + WWW forecasts to come down significantly
  • Over the weekend SYS price could see a bearish correction + stronger CWW forecasts that supports a correction down in the futures

• DEU SYS price vs. NC

  • Into week 13 there is a bearish potentil for NC as the wind in DEU picks up and we see higher inflow + stronger CWW forecasts
  • But as for now with normal’ish Hydbal DEU is a bull motivator since Hydro producers have control
  • Thus, a collapse in SYS price is not expected and Hydro producers can adapt to windy periods

• 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 5-7 Twh (Refinitiv, NENA the same, EQ Energy are about 5 twh higher) into week 13 and that will be a bearish pressure with current prices

• 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 13…
  • Thermal and Carbon
    • An April in CWW setup means cold temps supportive for thermal, but wind will in periods be above normal offsetting partly the colder temps bull effect
    • Into week 13 we should see higher DEU forecasted wind

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

  • Sell 5 MW April
  • The purpose is to get a better average price since cold temps, strong SYS price and low inflow, moderate CWW forecasts with current Hydbal support current prices for April

• Week 13

  • Profit-taking/Break even:
    • The purpose is to get break-even into week 13 and thus sell 5 MW in week 12
    • Looks to be a bearish correction into the week
  • Look for the timing of long positions
  • There is a stronger bull potential for Q3 since we could see many weeks of WDC weather with high evaporation

• Week 14

  • More Long positions if WRM-WDC is effective and we see a cutt-off the

• Hedging

  • The market looks strong and the cold temps for April in a CWW setup do support the current SYS price
  • Into week 13 we should see some correction down before a possible bull development into week 14+++
  • But for now, there is not possible to call off solid CWW/WWW periods until May
  • We need proof of an effective solid FSW that maks touchdown or Hydbal will gradually come higher towards May
    • =>  this is now spotted and could be confirmed into week 13+14

Weather-trading and hedging: medium-range

• (This section is under developemnt/research)
• As for now the outlook for March+April is accumulated W(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 (C)WW 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…