Weather Trading – 07.05.2021

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

Portfolio:

• 20 MW front quarter
• 60 MW front month

• WRM(e)+PV/Jet+SRA

  • Looks to be more WDC into week 19, and the CWW risk fades off

• Statistics – normal vs WRM+PV/Je

  • We are moving away from a lasting stable CWW pattern and dry weeks can offset wet weeks

• Volatility forecasts – “strategy”

  • The CWW turn the last days shows WRMe-CWW effect => thus WRM(e)-WDC into next week will shift forecasts less CWW to WDC

• Hydbal/Inflow/Wind/Temp/Flow

  • Models overestimate inflow at the start of the melt next week
  • Cold night temps hold mountain inflow lower than expected
  • Low wind gives hydro producers space to produce unregulated
  • High DEU prices will give high export of unregulated production

• NC SYS price vs. futures

  • SYS price supports a bull outlook into the week, even with some windy days, since temps and inflow is low
  • Next week could call off bull support from SYS price but a shift to less CWW and that inflow will come in slower could give further support for bull SYS price in line with calm winds

• DEU vs. NC prices

  • A large gap to DEU is a bull motivator – bearish NC trend need solid CWW and observed inflow over normal
  • Many large companies look to be bull on the large gap
  • NC should be 10-14 euro below DEU as things are now

• Fundamental market models and thermal-carbon

  • Futures vs. market models
    • Market models support current prices and show a bull potential
  • 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 18-19
  • A bull market, the risk for new WDC turn in forecasts
  • Hold 5 MW Q3 2021
• Week 19-21
  • If lasting WRM-CWW signal and no solid PV-WDC setup
    • => Profit taking
    • => If we see a PV-WDC response buy Q3 2021
    • Cant sell Q3 2021 – the gap to DEU is too large and DEU can rise 4-8 Euro on crazy carbon
    • Only sell June for risk spread to Q3 long positions

• Hedging

  • Looks that the solid CWW risk fades off…
  • We also see a limited effect on CWW forecasts on prices – we need to be observed high inflow+CWW forecasts to get futures down
  • There is also a risk in the snow in that it could be lower than what the market expects – EIKON – REFINITIV could be right…

Weather-trading and hedging: medium-range

• Timing of hedging – medium time frame

  • Medium-term analysis shows that a CWW May often gets offsets by dry periods thereafter
  • Thus, accumulated precipitation we are closer to normal into the summer
  • The Gap to DEU support  NC prices and when Hydbal gets lower again price will rise closer to DEU

• Correction of portfolios

  • Especially if we see accumulated dry over the summer that will be needed since then the Gap between NC and Germany will be less => hedging prices are about  28-32 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…