Falling fuel prices drove the power prices down, but a rebound might loom

The European power spot prices dropped yesterday as the ongoing wind surge offset the weaker clean gas cost and pressured the market. The day-ahead prices averaged 164.69€/MWh in Germany, France, Belgium and the Netherlands, -16.22€/MWh day-on-day with only the French prices remaining above the clean coal cost thanks to the country’s catastrophic nuclear availability.

The power curve prices opened on a bearish note on Tuesday, driven down by the falling coal prices and early weakness of the gas market. Most contracts settled lower from the previous day but reports that Ukrainian TSO GTSOU announced it will be in force majeure as of this morning for one its two interconnection points with Russia (see our news sent yesterday for more details) came shaking the energy complex late in the afternoon. The German power contracts jumped alongside the gas market on the news with most gains posted after settlement and on the front of the curve and hence seen only this morning, but the French power prices seemed unmoved by the event, living their own life as they have over the past weeks.

Limited reaction was also seen on the carbon market with prices trading sideways in a rather narrow trading range for most of the day before slightly retreating as gas prices started to soar. The EUA Dec.22 closed at 87.34€/t, +32-cent from Monday’s settlement, but we might see some increase volatility today as the energy complex digests the gas disruption news and attempt to estimate the impact on prices.