Weather Trading – 13.04.2021

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

Portfolio:

• 20 MW front quarter
• 60 MW front month

• WRM(e)+PV/Jet+SRA

  • Bull for week 15, but suggest profit-taking before week 16

• Statistics – normal vs WRM+PV/Je

  • A WDC path could cause evaporation and thus Hydbal could come down faster into May if we see a solid WDC setup
  • In case of a shift back to CWW into May, we could see significant precipitation and wind as seen in May 2015
  • We need proof of FSW strength and effect on the surface before we can set the effect into May
    • => There looks to be stronger CWW periods into May
    • => Strong FSW late May is likely and thus not that accumulated CWW, but shifting onwards…

• Volatility forecasts – “strategy”

  • Predicting stable weather trends in April-May is harder and natural variability causes more shifting outlook
  • Thus, only in the strongest WRM days should WRM signals be used
  • For now, the highest risk solid WDC forecasts is into the second part of the week
    • => Use bull runs to close positions

• Hydbal/Inflow/Wind/Temp/Flow

  • Lower temps holding inflow low and consumption high, low NC+DEU wind, less wet and windy forecasts do point towards bull support into week 15, possible 16
    • => WRM shifts so week 16 has too high CWW risk in forecasts

• NC SYS price vs. futures

  • SYS price is strong, especially S-NO
    • => But a shift to stronger CWW, also in S-NO will cut off the bull support from SYS price…

• DEU SYS price vs. NC

  • Any stable dry and calm indications and futures will come back up fast closer to DEU
    • => The market is careful and nervous
    • Could come up later in week 15 but week 16 is risky

• NC spread to DEU

  • Very large, but the gap looks to be closed at closer range to delivery
  • Large price movements lately support profit-taking

• Fundamental market models and thermal-carbon

  • Futures vs. market models
    • Market models support current prices and show a bull potential into week 15
  • Thermal and Carbon
    • Carbon and thermal looks strong and is a bull motivator for NC at current NC vs DEU prices and low Hydbal

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 15-16: short or long?

  • Profit talking
  • WRM week 16 looks stronger CWW and PV movement supports more CWW forecasts
  • Wait for short/bearish or even long/bull positions to start week 16
    • => if the WRM-WDC is effective we could see WDC weather (far below normal) the next 10-13 days
    • => then we need solid CWW to offset the dry impact up to then
    • => If we by then sees a solid FSW the upcoming CWW/bearish forecasts period could be done to get new bull/long pos

• Hedging

  • For now, there is not possible to call off solid CWW/WWW periods into May
  • We need proof of an effective solid FSW that maks touchdown or Hydbal will gradually come higher towards May
    • => If not confirmed, then new solid wet periods is likely
    • => Then short term heading is suggested since a CWW May will lower prices significantly as inflow-wind-precip will get prices down again
    • => futures tends to follow the close range

Weather-trading and hedging: medium-range

• (This section is under developemnt/research)
• As for now the outlook for April+May is accumulated CWW
  • => But it looks to be a pause from CWW for about 1,5 weeks in week 15-16
• Depending on the FSW and its effect new strategies will be made
  • => For now the first part of May looks CWW’ish before we see the WDC effect of the FSW

• 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 prices looks to be related to shorter periods when we see massive wind and inflow in NC, especially when DEU follows up with strong wind

• 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…