Weather-Trading at 26.03.2021 at 10:08

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

• WRM(e)+PV/Jet+SRA

  • WRM(e)-CWW effect is seen in the last runs and thus looks to affect forecasts into week 12 and 13
  • WRMe-WDC effect looks weaker thus W(C)WW’ish into next week forecasts is likely

• Statistics – normal vs WRM+PV/Jet

  • Strong PV, PV core west or over NP, and WRM-CWW signals suggest accumulated W(C)WW and that massive low-pressure can develop and thus we are facing the outer edge of the CWW-statistic
    • => However, observed vs forecasted precip in March shows that models overestimate precip so far
  • Its not expected to be stronger observed WWW/CWW until late March and into April limiting the bearish effect of WWW for now

• Volatility forecasts – “strategy”

  • Next week WRM(e)-CWW + Observed CWW will cause bearish weather pressure not seen for some time
  • An  April in CWW mode means colder temps than normal and that limits inflow and supports thermal on the continent
  • Thus, the bearish effect of CWW is postponed to months with higher inflow limeting the bearish impact on April

• Hydbal/Inflow/Wind/Temp/Flow

  • Inflow is coming up into week 13 and that with CWW forecasts could cause some bearish pressure at current prices
  • WInd looks to be higher into next week forecasts as well…

• NC SYS price vs. futures

  • SYS price is strong and needs observed WWW + WWW forecasts to come down significantly
  • As for now, we need a bearish correction into the week to justify holding bearish positions
  • That looks less likely but into week 13 a correction down is expected before a more bull weather period is expected into week 14 forecasts

• DEU SYS price vs. NC

  • Into week 13 there is a beraish potentil for NC as wind in DEU picks up and we see higher inflow + CWW forecasts
  • But as for now with normal’ish Hydbal DEU is a bull motivator since Hydro producers have control
  • Thus, a collpase in SYS price is not expeted and Hydro producers can adapt to windy periods

• NC spread to DEU

  • As long as Hydbal is below 7-8 Twh surplus DEU prices will be a bull motivator during dry and calm days/periods
  • But obs + forecasted Hydbal could get up to a surplus of 5-7 Twh (Refinitiv, NENA the same, EQ Energy are about 5 twh higher) into week 13 and that will be a bearish pressure with current prices

• Fundamental market models and thermal-carbon

  • Futures vs. market models
    • Market models support current prices and show a bull potential
    • That can change into week 13…
  • Thermal and Carbon
    • An April in CWW setup means cold temps supportive for thermal, but wind will in periods be above normal offsetting partly the colder temps bull effect

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 12

  • Sell 5 MW April
  • The purpose is to gett a better average price since cold temps, strong SYS price and low inflow support current prices for April

• Week 13

  • Profit-taking/Break even:
    • The purpose is to get break-even into week 13 and thus sell 5 MW in week 12
  • Look for the timing of long positions

• Week 14

  • More Long positions if WRM-WDC is effective

• Hedging

  • The market looks strong and the cold temps for April in a CWW setup do support the current SYS price
  • Into week 13 we should see some correction down before a possible bull development into week 14
  • But for now, there is not possible to call off solid CWW/WWW periods until May
  • We need proof of an effective solid FSW that maks touchdown or Hydbal will gradually come higher towards May

Weather-trading and hedging: medium-range

• (This section is under developemnt/research)
• As for now the outlook for March+April is accumulated W(CWW
• 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
    • 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…)
    • 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. For May-June massive (C)WW is not likely…

• 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…