European year-ahead power falls from record-highs, summer contracts rise

European year-ahead power prices eased from record-highs in the week to June 10 while summer contracts rebounded.

The benchmark German Cal 23 contract fell 10% trading June 10 below Eur225/MWh after starting the week at a record Eur249/MWh, EEX data show.

July rebounded after closing June 8 below Eur180/MWh, the lowest for a front-month since February.

Front-month contracts are now just a third of levels seen three months ago, while year-ahead contracts are up around 50% since the outbreak of war Feb. 24.

TTF front-month gas also bounced off three-month-lows below Eur80/MWh after a fire at the Freeport LNG terminal in Texas lifted July contracts to Eur84.65/MWh June 9, still down 3% over the fortnight, S&P Global Commodity Insights data show.

Coal into Europe for 2023 fell 2% to $219.75/mt by June 9, while EUA carbon allowances fell below Eur80/mt June 8 after the European Parliament rejected a reform of the EU ETS.

On the spot, holidays across Europe eased demand amid rising temperatures and falling wind and hydro production.

German wind fades

German day-ahead averaged Eur168.50/MWh May 27-June 9, up 3.5% over the fortnight as low wind provided some support even as demand inched lower.

July settled June 9 at Eur185.5/MWh on EEX, down 6% over the fortnight with summer contracts shedding risk premiums as supply disruption seemed less likely to market participants.

The contract remained down over two weeks even as it received a boost June 9 after the explosion at the Freeport LNG terminal.

"Still same fundamentals: high LNG and mild weather," a trader said.

Further out, contracts remained firm on the risk of Russian supply disruptions and sub-optimal stores, the trader added.

"Soaring prices by the end of the year are a fact...rumors of cold winter will circulate and push up prices," another trader said.

EDF postpones Q1 outages

French prices remain elevated due to record-low nuclear and fears of gas supply shortages in Europe.

May's average dipped below Eur200/MWh, down 17% from April with only Italy averaging higher.

Demand dipped below 42 GW May 27 to June 9 allowing France to maintain net exports with Italy receiving on average 2 GW over the fortnight, while the UK sent 1.5 GW to France, according to RTE data.

Flows on the Spain-France interconnectors reversed southbound over the period that included the Whitsun holiday.

Nuclear output averaged 27.3 GW in May, down 9% from April with monthly output hitting record lows for the past nine months.

French hydro averaged 5.8 GW over the fortnight, while wind averaged 2.9 GW.

Winter risk premiums eased slightly after EDF postponed planned maintenance at seven reactors early next year by 2-3 weeks with Q1 baseload trading June 10 at Eur515/MWh compared to levels around Eur550/MWh in late May.

Spanish day-ahead averaged Eur190.05/MWh in May, little changed from April, but up 183% on year.

Spain remained at discount to the rest of Europe mainly due to the gas-for-power price cap set to start June 14 after approval by the European Commission.

Cal 2023 settled June 9 at Eur153.50/MWh, half of French levels Cal 23 values of Eur300/MWh-plus.

"We [Spain] are getting ready for next winter, but if the winter is really cold is not going to help without the backup of Russia, there is a need for a solid backup plan," a Spanish trader said.

The Eur40/MWh price cap on gas used in power generation is set to maximize power exports to France.

Spanish solar soared 38% on year in May but at 3.2 TWh remains behind wind, down 2% at 4.6 TWh.

Hydro fell 11% on year to 1.9 TWh, REE data show.

Italy at summer premium

In Italy, day-ahead settled June 9 at Eur203.56/MWh, about 8% below prices so far this month, GME data show.

Prices were pressured by low levels in Sicily and Southern zones on some days.

July baseload settled at Eur235.93/MWh June 9 on EEX, down just 1% over the two-week period.

Prices continued to score some support from low hydro averaging just 4.9 GW June 1-9, down 33% on year, Terna data showed.

Cal 2023 rose 2.5% over the fortnight to Eur211.64/MWh June 9 with Italian year-ahead baseload at a discount to both Germany and France.

"Gas in winter keeps its risk [premium] at the moment. It's not finished," a trader said.

UK discount narrows

UK day-ahead power averaged GBP141.68/MWh month-to-date, up 14% from early May as wind power generation fell, S&P Global data show.

Warmer weather and the holiday weekend capped prices, while NBP gas remained at a discount to Continental hubs.

A fire June 8 at Freeport LNG terminal provided bullish sentiment with around 20% of US LNG processing offline for at least three weeks.

Market participants said that any longer outage would prove difficult to maintain healthy storage injections.

NBP July gas jumped 17% June 9 with gains filtering through into power where July baseload rose 9%.

As a result, the UK's discount over French front-month power narrowed to Eur27/MWh.

UK gas generation averaged 15 GW so far this month despite a June 3 peak at 18.7 GW, BMRS data show.

Wind averaged 3 GW, down 0.3 GW, while nuclear dipped to 5.5 GW.

MONTHLY AVERAGE POWER PRICES (Eur/MWh)

* GB converted by Platts to Eur/MWh

Source: Epex Spot, OMIE, GME,S&P Global Commodity Insights