The German April power contract is currently trading at the highest in a March in the past five years, according to historical S&P Global Platts data, but could tumble if forecasts change to show warmer weather, traders said.
Cold spells raised premium for front-month
April highest since 2013 at this time of year
Temps, wind to determine possible slide: traders
Last seen at Eur33.70/MWh at Friday midday, April baseload closed as high as Eur35/MWh on Monday this week and traded at its highest at the end of 2017 at Eur36.25/MWh on December 29.
Cold spells in Europe at the end of winter caused spikes in power prices and created tightness in the gas storage system.
This makes future changes in temperature -- such as the looming cold snap --- more important, traders said of current levels.
"Gas storage is still running low," traders told S&P Global Platts this week. Uncertainty about the length of the imminent cold snap would keep near curve prices elevated.
"The [April] price seems fair taking current expectations, prognoses and generating fuel prices into account. But I expect the contract to trade lower at some point", a Germany -based trader said.
"For April the weather forecasts are the main driver. Currently there is not much wind generation showing up in the forecasts from week 12 onwards and it could stay cold for longer. However, looking at the alternative weather scenarios this situation could change quickly and it could get warm instead," the trader added.
Other European traders spotted downwards potential for German April as well.
"In my opinion, the risk premium is high for Germany [in April]. For France it may be fair since France is more sensitive to cold temperatures [...] but Germany is not and wind forecasts are quite unpredictable that far in advance," a trader said.
