Nordic Energy Markets Shaked by Wet Weather in September

In early August, Storm Hans made its presence felt, bringing with it heavy rainfall that significantly impacted numerous hydropower systems in Norway and Sweden. As a result, the reservoirs in the Norwegian price zone NO1 reached a staggering 102% storage level on average. This surplus of water left the waterways in an unprecedented flood situation. Additionally, several reservoirs in NO5, parts of NO2, and Swedish price zones also approached near-full levels. Over the subsequent two months, these same regions experienced further bouts of heavy rainfall stemming from the remnants of tropical storms.

This meteorological event had profound repercussions on energy prices. Spot prices in nearly all Norwegian and Swedish price zones plummeted to exceptionally low levels throughout the month of September. To illustrate this, the September forward contract was initially traded at 42 €/MWh in early August but was ultimately delivered at 13.57 €/MWh.

Chart showing the difference between forward prices for September, and delivered prices.

The impact extended beyond spot prices, affecting the Nordic forward markets as well. In late August, the November contract was being traded at 62 €/MWh, but by the 5th of October, it had plummeted to 28 €/MWh. Similarly, the Cal-24 contract also experienced a notable decline, falling from 57 €/MWh to 42 €/MWh during the same period.

However, earlier in week 41, the Nordic power market was hit by a wave of bullish factors: a change in weather and day-ahead price patterns (slightly colder, drier and less windy weather forecast and a few days with significantly higher Nordic area prices), the escalating of conflict in the Middle East, the damage to the Baltic Interconnector gas pipeline, and the still unresolved strike risk in Australia, affecting LNG supply. The TTF gas contract for the month of November increased by 33%, which also shook the Continental and Nordic winter power contracts. The Nordic power contracts for November, December and Q1-2024 traded 16-18 €/MWh higher. The November contract closed at 44.5 €/MWh on Tuesday, having traded at 28 €/MWh on 5th October. 

With the winter season fast approaching, it is prudent to remain vigilant for possible changes in weather patterns and potential further turbulence in the European gas markets and their corresponding impact on Nordic power prices in the coming weeks.