Weather-Trade – 07.04.2021

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

• WRM(e)+PV/Jet+SRA

  • There is a CWW potential into the week before we see a shift to high-pressure setup in forecasts into late week 14 and week 15

• Statistics – normal vs WRM+PV/Je

  • April and May do show potential for stronger CWW periods than March during low-pressure regimes
  • As for now, there is not stable WDC setup seen
  • Into week 14 we could get proof of an FSW and its effect
  • No solid FSW and bull weather thinking must take place over shorter periods since a fallback to wet and windy forecasts are high

• 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, a “stable” WDC path is not likely before Thursday
  • However, into late week 15 there is potential for a fallback to CWW
  • If we see proof for lasting WDC setup into week 15 and 16 there is a bull weather period coming up

• Hydbal/Inflow/Wind/Temp/Flow

  • Lower temps holding inflow low and consumption high, less wet and windy forecasts do point towards bull support into week 14 and 15, possible 16

• NC SYS price vs. futures

  • SYS price is strong, especially S-NO
  • In the case of a lasting WDC path for 2-3 weeks, there is a strong bull potential

• DEU SYS price vs. NC

  • Any stable 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 (Eikon) DEU prices will be a bull motivator during dry and calm days/periods

• 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 13

  • Closed positions – break even

• Week 14

  • Buy/Long 2 MW Q3 2021 Wednesday
  • Buy/Long 2 MW Q3 2021 Thursday-Friday

• Week 15-16

  • If WRM-WDC solid effect the Buy/Long 4-6 MW Q3 2021
  • Only solid FSW then buy more…

• 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
    • =>  this is now spotted and could be confirmed into week 14
    • => If not confirmed, then new solid wet periods is likely

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
• 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

• 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…