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Soaring temperatures send French, German August power prices higher

Highlights

German month-ahead hits more than six year high

August base price in France jumps over Eur2 on day

Spanish spot, front-month both at near 2-month

London — Forecasts for a prolonged heat wave coupled with concerns over reduced nuclear power plant availability and easing renewables generation sent the French and German month-ahead power contracts soaring for the second consecutive day on Wednesday, sources said.

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Prices are moving higher on "the weather again and gas" while "Belgium still has nuke production problems," which is further contributing to the bullish sentiment, a market source said.

In Germany, the month-ahead price surged to more than a six-year high of Eur53.75/MWh in intra-day trading on the over-the-counter market. The contract was the highest since the month-ahead settled at Eur53.89/MWh on December 13, 2011, EEX data shows.

French front-month August baseload contract rose sharply to Eur54.25/MWh on the OTC market, gaining more than Eur2 on the day.

Both the German and French weather forecasters DWD and MeteoFrance confirmed their expectations of "hot to very hot" temperatures this week, with some parts reaching a high of 37-38 degrees Celsius by Thursday and Friday, a trend which is likely to last into August.

A tighter supply landscape also helped boost short-term prices. Germany is experiencing a wind lull this summer, while ongoing nuclear safety issues in Belgium and possible nuclear output restrictions due to high temperatures in France are supporting the market.

In addition, Spanish power prices were rising across the curve, tracking similar gains in Europe. The front-month August contract was trading at Eur64.50/MWh around 11:00 am London time, up almost Eur1 from Tuesday's settlement on OMIP and at the highest for a front-month contract since June 1.

The contract was further supported as gains filtered through the curve as the spot traded at Eur65.30/MWh, a near two-month high. Rising gas prices lent further support to the curve, traders said.

In the gas markets, the Dutch TTF winter 2018 gas prices edged up to Eur22.90/MWh in Wednesday morning trade.

--Anuradha Ramanathan, anuradha.ramanathan@spglobal.com

--Mario Perez, mario.perez@spglobal.com

--Edited by Jonathan Dart, jonathan.dart@spglobal.com