The fuel markets are in the middle of an upwards trend at the moment. In China, the demand for coal is very high due to a persistent heat wave. The country’s own inventory levels are quite low now, and both Indonesia and Australia, who usually export to the Chinese, have been hit by production issues due to strikes and bad weather. Therefore, the coal prices are continuously rising currently, and a ton of coal for delivery in 2018 currently costs 76 US dollars, the highest price level since 2014. The European gas markets are rising as well. Prices are at a five-month high, since production issues on the Norwegian gas fields continue to cause insecurity on the markets.
The rising prices have led to a price rally on the fuel-dependent German power market. The German Cal-18 contract closed Thursday in 31.80 EUR/MWh, the highest price level since July 2015. As a comparison to the current price level, the contract was down in just around 20 EUR/MWh in March 2016.
Even though it is worth mentioning, that the German trading activity is currently subdued due to summer holiday season, and that the price fluctuations have therefore happened based on a relatively low amount of trades, it is still noticeable that we have seen this big an upside. The rising prices are also interesting on a Nordic power market, as a weak hydrological situation often means, that he spread between the Nordic and the German power prices fall.
Currently, the Nordic hydrobalance is in a solid surplus, but if the weather forecasts turn dry again, we could suddenly see big price gains on the Nordic power market, as it would have a lot of distance to cover to keep up with the German price level.
You can follow the price developments on both the Nordic and the German power markets daily in our Morning Report.