Nordic power contracts edge higher as energy costs and weather factors resonate

⑴ On Wednesday, the Nordic power quarterly contract price rose slightly by about 0.3 euros to approximately 91.85 euros per megawatt hour, mainly driven by stronger European energy prices and expectations of cooler regional weather. ⑵ Institutional analysts pointed out that rising natural gas prices prompted German power contracts higher, serving as the main external driver for the Nordic power price increase that day. The Middle East shipping attack incident dampened hopes for a US-Iran peace agreement and the resumption of LNG transit through the Hormuz Strait. ⑶ The German next-year power contract simultaneously increased by around 2.15 euros to about 106.65 euros per megawatt hour, further confirming the logic chain of gas prices feeding through to electricity prices. The pattern of European benchmark power contracts being influenced by energy costs continues. ⑷ On the weather front, meteorological forecasts indicate that the Nordic region will continue to experience cloudy and locally unstable conditions until the end of the month. Most temperatures will stay below normal, rainfall will be close to usual levels, and no significant changes are expected before late August. Below-average temperatures will raise expectations for heating demand, supporting power consumption and prices. ⑸ Nordic water reserves have remained in negative territory since the end of December last year, standing at about 12.65 terawatt hours below normal on the day, down from roughly 14.31 terawatt hours the previous day, but still one of the supporting factors for prices. ⑹ In the carbon market, the benchmark contract edged down by about 0.41 euros to approximately 82.03 euros per ton. The linkage between energy and carbon prices remains, and further attention should be paid to the impact of the Middle East situation on natural gas prices, as well as whether the Nordic weather forecast will be revised to even colder conditions.