Weather Trading -05.05.2021

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 a modest bull signal into the week but we are not 100% on a solid WDC path
  • MJO, WRM and PV-Greenland part is a risk for change in forecats and less stable pattern
  • Towrds Friday we could see stronger CWW forecasts, but the volatility between runs will be large

• Statistics – normal vs WRM+PV/Je

  • May has the possibility to see solid CWW periods as it looks now
  • Statistics show that May often trends stronger CWW later into May, and can have a “bull” start
  • But, the start of week 19 shows stronger WRM-WDC => if that fails to set up a solid PV/Jet-WDC setup we will see some weeks of modest CWW

• Volatility forecasts – “strategy”

  • The large spread between runs and WRM effect does point towards moderate to high risk
  • Thus, a stable WDC path in forecasts is less likely

• Hydbal/Inflow/Wind/Temp/Flow

  • Into the week we see bull support from low inflow and temps, and the windy period looks to have a limited impact on water values
  • DEU sees strong prices
  • Next week rising inflow will be the first “test” on the strength of water values for weeks

• 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…

• DEU vs. NC prices

  • A large gap to DEU is a bull motivator – bearish NC trend need solid CWW and observed inflow over normal

• 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
  • Profit-taking until we see the WRM-CWW response within Friday week 18
  • Week 19 WRM-WDC effect on PV can call off solid CWW risk later on but as it looks now WRM-WDC has limited effect and just calm solid CWW days down, not shifting the weather pattern to stable WDC…
• Week 19-21
  • If lasting WRM-CWW signal and no solid PV-WDC setup
    • => Sell Juni 2021
    • Cant sell Q3 2021 – the gap to DEU is too large and DEU can rise 4-8 Euro on crazy carbon

• Hedging

  • For now, there is not possible to call off solid CWW/WWW periods into May
  • But we see a limited effect on prices – we need to be observed high inflow+CWW forecasts to get futures down but June will most likely come down when the bull support from SYS price is over
  • There is also a risk in the snow…

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…