Weather-Trading – 28.03.2021 at 23:40

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

• WRM(e)+PV/Jet+SRA

  • CWW risk until the weekend, even some hints over the weekend before more stable WDC setup into week 14+

• 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 can 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
  • If PV “survives” WRM-WDC days new solid CWW period is likely

• 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
  • Into week 14 there is a CWW/WWW risk and it’s not until the start of week 14 we are on safer WDC territory for forecasts

• Hydbal/Inflow/Wind/Temp/Flow

  • We will see peak inflow around 1 of April and that could be a bearish surprise since we could see “solid” wet and windy forecasts as well
  • Cold temps will lower inflow again and supports water values
  • Relatively low-moderate wind in DEU does not support any collapse

• NC SYS price vs. futures

  • If SYS price looks bearish and stays below 30 into the week we could see a correction down in the futures
  • Especially towards the weekend with obs CWW and CWW forecasts, there is a temporary bearish potential

• DEU SYS price vs. NC

  • Any dry and calm indications and futures will come back up fast closer to 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 5-7 Twh (Refinitiv, NENA the same, EQ Energy are about 5 twh higher) into week 13 and that will be a bearish test 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 the 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 13

  • Looks like we will come down
  • Break-even is the goal…
  • No positions over the weekend as it looks now

• Week 14

  • Safer bull weather trades is not seen until the start of week 14

• Week 15-17

  • Any solid wet and windy risk is not called off so new sell/short positions could be realistic
  • Stable bull weather is not seen yet but was hinted off in week 12
  • If solid WDC setup is seen into week 13 bull/long positions for Q3 is suggested

• 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
    • => If not confirmed, then new solid wet periods is likly
    • April can see more wet setup than March according to the normal

Weather-trading and hedging: medium-range

• (This section is under developemnt/research)
• As for now the outlook for March+April is accumulated W(C)WW
• 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
  • S-NO and S-SE shows a bull potentil as long as inflow and wind is low
    • 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…)
    • => S-NO keeps holding prices over DEU …
    • 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…