March 20, 2012 / 11:29 AM / 6 years ago

Nordic power-Benchmark falls with rainier outlook

OSLO, March 20 (Reuters) - Forward Nordic power prices <0#ENOALL:> fell on Tuesday on prospects for rainier weather ahead.

The benchmark contract on the pan-Nordic Nasdaq OMX Commodities exchange, the second quarter of 2012, fell 1.75 percent to 28.10 euros ($37.21) at 1106 GMT.

The front-month contract, the April 2012, was down 2.35 percent to 27 euros.

“The first forecasts came in a bit drier and colder, but the latest data show a bit wetter weather again, so (prices) are now coming down again,” said a Sweden-based trader.

“It feels like the hydrological situation is behind this move. It looks difficult to maintain the Q2 contract up at this level considering the hydrological balance, and we’re now approaching April.”

Norway’s and Sweden’s water reservoir levels are unusually high for the season. With above-normal temperatures holding down demand and the spring melt under way, hydro producers may be forced to produce to avoid over-full reservoirs.

“Coming into April with 19 TWh oversupply ... we are trading the second quarter contract around today’s spot level, and one wonders how that could possibly keep up,” the trader said.

PRICE DRIVERS

* Spot price expectations: the trader expected the spot price for Wednesday to come out between 28.50 and 29 euros later today.

* Weather: forecaster Georg Mueller at Point Carbon, a Thomson Reuters company, said weather conditions were set to be dry in the coming days and then turn more unsettled and eventually also cooler toward the weekend and next week.

“Temperatures generally above normal at first but slowly cooler later on with values approaching normal in early April,” Mueller said.

* Hydro balance: the total amount of snow and water available across Norway, Sweden and Finland 15 days from now will be 18.8 terawatt hours above normal, according to Point Carbon.

* Oil: a barrel of Brent crude was worth 124.28 dollars at 1108 GMT, down 1.15 percent.

* Carbon: The front-year European Union Allowances permit was down 3.47 percent to 7.52 euros.

* Coal: the short-run marginal cost of coal is expected to be 39.10 euros per megawatt hour in the second quarter of 2012, unchanged compared with yesterday’s close, according to Point Carbon.

$1 = 0.7552 euros Reporting by Victoria Klesty, editing by Jane Baird

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