European heat wave is easing

The heat wave, which has caused a big price jump on the European energy markets during the last couple of weeks, and the largest carbon price for 13 years, is set to ease this week.

Last week was characterized by rather extreme weather in Europe. In Germany, the highest temperature ever in the country was measured Thursday, with 42.6 degrees in the state of Lower Saxony. The extreme heat dominated most of the week, and affected the other countries in South and Central Europe as well.

The heat wave forced France to shut down some of the country’s nuclear power reactors during the week, and this affected the markets. The limited supply from the nuclear power sector caused higher production on the European coal and gas power plants, which led to a steep increase on the carbon emission market. The increased demand caused the carbon price to rise to 29,95 EUR/t, the highest level in around 13 years, before the market edged down a bit late in the week. Meanwhile, the coal market saw a rare upturn, with price rising to the highest level in around three months.

Now however, it looks like the heat wave is about to ease, and several of the closed French reactors will be re-started during the coming days. The weather forecasts predict temperatures only marginally above the normal in both Germany and France during the coming week. Power prices both countries appear to fall compared to last week. In Germany, we expect an average daily price of 42 EUR/MWh this week, while the level should drop to 38 EUR/MWh next week.

In the Nordic area, the temperature level appears to fall as well during the week, where precipitation amounts are meanwhile set to increase. This caused a bearish sentiment on the forward market late last week, where prices fell for three straight days.