PARIS: European forward electricity prices surged to a year-high on Wednesday on the back of tight French nuclear power supply and bullish oil futures which lifted other energy contracts including coal and gas.
Oil prices rose nearly 2 percent on speculation oil producers gathered in Algeria could lay the foundation for an output-limiting deal in November, and on the possibility of another draw in US crude stockpiles.
Traders said the power market was already short for various reasons including French utility EDF's announcement that it was expecting lower nuclear power output due to increased safety controls which have caused several nuclear plants to extend the length of their outages.
French available nuclear power capacity for Thursday is seen at 61.27 percent compared with 59.85 percent the previous day, but was down compared with 69.65 percent a year ago. "The market is quite short so any bullish news can have quite an exaggerated effect," one trader said.
The benchmark German Cal'17 year-ahead baseload power contract gained over 2 euros, or 7.43 percent, to 29.65 euros per megawatt hour (MWh), last reached last September. The less liquid equivalent French contract rose 2.2 euros, or 6.20 percent, to 37.70 euros/MWh after hitting a year high of 38.60 euros.
European 2017 coal prices, which govern a large share of German power generation, rose 3.78 percent to $63.20 a tonne, their highest since the beginning of March 2015 as oil rose.
Front-year EU carbon allowances gained 12.87 percent to 5 euros a tonne. In the spot market prices for next-day delivery fell on abundant wind and solar power. However, the week-ahead prices were up.
German renewable wind power production is expected to remain high on Thursday, adding 170 megawatts day-on-day after rising by over 18 gigawatts (GW) the previous day, according to Thomson Reuters data. In France, where nuclear power accounts for about 75 percent of electricity needs, supply will rise by about 1.5 GW day-on-day after two reactors resumed production following unplanned outages.
Consumption is also expected to fall in France on Thursday by about 400 MW, while combined wind and solar power will rise by 760 MW, adding pressure on spot prices.
The German baseload power price for Thursday delivery fell 1.6 euros, or 6.21 percent, to 24.15 euros ($27.08) per megawatt-hour (MWh) compared with the price paid for Wednesday. The equivalent French contract fell 3.5 euros, or 8.24 percent, to 39 euros euros/MWh.
In eastern European power, the Czech year-ahead 2017 contract rose 1.22 percent to 29 euros/MWh, while the spot for Thursday gained 5.5 euros, or 17.46 percent, to 37 euros/MWh.
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