Nordic Power Retreats From Three-Month High as Gas Costs Fall

May 27, 2014 11:52 am ET

May 27 (Bloomberg) -- Nordic next-quarter electricity fell from the highest level in three months in line with declining natural gas prices. Power contracts for June climbed in Germany and France.

The benchmark Nordic contract lost 0.9 percent by the close, according to data from Nasdaq OMX’s commodities exchange in Oslo. Month-ahead Dutch gas dropped as much as 2 percent, broker data compiled by Bloomberg showed.

Gas prices are a driver for power markets because they can affect production costs and influence how traders price electricity contracts. Next-month gas on the Dutch Title Transfer Facility hub retreated to the lowest level since May 20, according to broker data.

“Forward prices are not getting support from gas,” said Gert Lehmann, the head of trading at Scanenergi AS in Aarhus, Denmark. Prices had climbed earlier as weather forecasts showed below-normal precipitation, he said.

The next-quarter Nordic contract settled at 27.20 euros ($37.04) a megawatt-hour after earlier climbing as much as 1 percent to 27.73 euros, the highest intraday price since Feb. 19, according to Nasdaq OMX data. Month-ahead Dutch gas fell as low as 19.18 euros a megawatt-hour and traded at 19.23 euros as of 5:35 p.m. Amsterdam time, the broker data showed.

Seasonal Average

The Nordic area runs water through turbines to meet more than half of its power needs. The region’s hydropower reserves are set to be 4.4 terawatt-hours above the seasonal average in two weeks, compared with a forecast of as much as 7.1 terawatt- hours yesterday, according to Markedskraft data on Bloomberg.

Nuclear reactors in the Nordic region were operating at 46 percent of their combined capacity today. Output is expected to increase tomorrow as utility Teollisuuden Voima Oyj is scheduled to start its 880-megawatt Olkiluoto-1 reactor in Finland. EON SE plans to start its 473-megawatt Oskarshamn-1 Swedish reactor on May 29, according to the company’s website.

German power for June added 0.3 percent to 30 euros a megawatt-hour, while the equivalent French contract rose 0.9 percent to 28.90 euros, set for an eighth advance in a row, broker data showed. German next-quarter electricity gained 0.2 percent to 32.85 euros a megawatt-hour.

Day-ahead German power fell 1.3 percent to 36.96 euros a megawatt-hour, while the equivalent contracts slid 2.4 percent to 37.03 euros in France and dropped 2.5 percent to 25.24 euros in the Nordic region, according to exchange data.