Weather trading – 20.04.2021

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

Portfolio:

• 20 MW front quarter
• 60 MW front month

• WRM(e)+PV/Jet+SRA

  • Mixed into the week then bull week 17

• 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
  • Late May and into June sees a CWW risk, up to then WDC…

• 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
  • But, this week WRM(e)-CWW looks weak and has a shifting effect, next week more WDC…

• Hydbal/Inflow/Wind/Temp/Flow

  • Lower temps holding inflow low and consumption high, just a short peak of high NC+DEU wind, less wet and windy forecasts do point towards bull support into week 17

• 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 for futures
  • SYS price 40+ during calm days and Q3 at 30 Euro…

• 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
  • In the case of solid WDC path, the gap to DEU will be lower into week 17

• Fundamental market models and thermal-carbon

  • Futures vs. market models
    • Market models support current prices and could limits further upside
  • 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 16

  • Buy 2 MW Q3 2021 today
  • Wait until Friday
  • If solid WRM+PV WDC setup then Buy 2 MW Q3 2021
• Week 17:
  • Profit-taking
  • But if we see a lasting WDC setup and no FSW then Buy more

• Hedging

  • For now, there is not possible to call off solid CWW/WWW periods into May
  • But, this is related to the last part of May and into June
  • Much can happen in the fight between PV and FSW up to then…
  • Prices could come up…

Weather-trading and hedging: medium-range

• We are at a cross-road
• No need to hedge at current forecasts vs prices
• If we see solid CWW risk it will be verified into week 17 WRM+PV outlook
• Up to then Normal-WDC holding current prices…

• 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…