Weather Trading – 16.04.2021

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 since we don’t see a solid FSW and WRM shows a CWW risk

• Statistics – normal vs WRM+PV/Je

  • May can see both solid WDC and CWW periods
  • As it looks now there is a mixed outlook but the potential for solid WDC fades off and we are looking at possibilities for many strong observed CWW periods

• 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 larger volumes
  • Weekend risk is higher

• 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
  • But onwards there is several WRM(e)-CWW periods and thus we could see rising Hydbal and inflow (rain) into May that will cut off the bull support seen now

• NC SYS price vs. futures

  • SYS price is strong, especially S-NO
  • But some possible strong CWW periods showing up, uncertainties of snow levels, do point towards higher risk than normal

• DEU SYS price vs. NC

  • As for now, May can be solid CWW for NC while more moderate for DEU
  • Thus, bearish pressure will mots likly come from NC and that in case of a shift to lowe inflow and WDC path NC can fast see support from high DEU prices

• 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
  • In the case of a solid WDC path, the gap to DEU will be signeficant lower after the snow melting season
  • If Eikon is correct and NVE/EQ wrong we are up for a solid surprise – if NVE wins and with modest CWW May, we are up for a solid downturn…

• Fundamental market models and thermal-carbon

  • Futures vs. market models
    • Market models support current prices
    • But how cares, EQ, NENA, Volue, Eikon all have similar price outlook but signeficant differences in snow
    • => It’s easy to calibrate your model to adapt running prices no matter whats your Hydbal is…
  • 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 15-16-17

  • Profit taking, too uncertain outlook and only solid FSW show lasting WDC path for May
  • Await outlook into week 16
  • The market will not go more up and fear snow levels and CWW riks in May…

• 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
  • As for now, there is a risk for lower prices in the markets but SYS price does show bull developemnt
  • Cold April and into May supports prices now but then push more melting into June…
  • An S-NO CWW path will call off the bull S-NC SYS price support that has lifted the market…

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
  • Then  back to more CWW’ish
• Depending on the FSW and its effect new strategies will be made
  • For now, there is an accumulated CWW risk
  • Huge gap between snow estimates

• 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, after the snow melting
  • 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 look 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…