Weather Trading – 28.04.2021

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

Portfolio:

• 20 MW front quarter
• 60 MW front month

• WRM(e)+PV/Jet+SRA

  • Uncertain effect of the WRM in week 17, stronger indications of WRM-WDC effect week 18 and into week 19
  • MJO also supports a WRM-WDC effect into week 18-19
  • Thus, the PV-trough seen between 05-12 of May is a CWW risk for NC+DEU hat will be partly observed
  • Later into week 19 and up to week 22 there is a stronger CWW risk

• Statistics – normal vs WRM+PV/Je

  • We see a May-2015-2019 CWW setup and thus significant precipitation risk with wind both in NC+DEU
  • Into week 18 this setup must be called off and solid evidence for a shift to May-WDC must be seen for long/bull positions during week 18-19

• 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 now, the highest risk solid WDC forecasts is into week 18 and start week 19 but this needs confirmation in PV setup

• Hydbal/Inflow/Wind/Temp/Flow

  • Lower temps holding inflow low and consumption high, low NC+DEU wind up to 5 of May is a bull support
  • But the CWW period between 05-12 of May will cause significant higher Hydbal, temps looks to hold inflow low
  • Thus, Hybdal risk for June is higher

• NC SYS price vs. futures

  • SYS price is strong, especially S-NO
  • The CWW period between 05-12 of May as it looks now, will cause higher Hydbal and inflow which will remove the bull support from SYS price
  • S-NO sees more precipitation and thus could adjust water values
  • But if we see a WRM-WDC effect into week 18-19 the CWW period will have a limited bearish effect on SYS price and futures

• DEU vs. NC prices

  • DEU will see a CWW period during 5-12 of May but then it looks to calm down
  • Any stable dry and calm indications and futures will come back up fast closer to DEU
  • The Gap to DEU is too large both in the short to medium term for an NC collapse – for that, we need lasting CWW for 1-2 months

• 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 17

  • Closed positions until we see a confirmed WRM-WDC effect and how wet it gets between 05-12 of May
  • New bull/long positions on Friday, hopefully after a correction down up to then
    • => Friday long Q3 2021: 2 MW
• Week 18-19
  • If a confirmed WRM-WDC response and also seen solid in PV
    • => Mon-Tue long Q3 2021: 2 MW
  • Hold positions until late week 18 and possible into week 19
• Week 19-21
  • If lasting WRM-CWW signal and no solid PV-WDC setup
    • => Short-sell June and Q3 2021

• Hedging

  • For now, there is not possible to call off solid CWW/WWW periods into May
  • Based on the current setup short term heading is suggested since a CWW May will lower prices significantly for June and possible July

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 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  28-30 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…