Europe’s Power Prices See Relief as Weather Expectations Turn

(Bloomberg) -- Warmer weather forecasts are providing relief for Europe's power prices, bolstering a drop from record highs.

The risk of cold weather is diminishing as stronger expectations for warmer and windier weeks ahead push down the February price of power in Germany, a benchmark for the continent. That's fallen 9.9% this week, even as the month-ahead price of European gas, a main driver of power prices, has risen about 35%.

Concerns over French nuclear supply, which largely pushed up the price of February power in Germany last month, are still lingering though balanced by milder weather, said Sabrina Kernbichler, a power analyst at S&P Global Platts. “There is still some downside left for the German month ahead as the market continues to correct downward,” she said.

The price for February power has dropped from extreme highs, plunging to 262.50 euros per megawatt-hour from a peak of 517.53 euros in December. Meanwhile, gas traders are watching Russian shipments, with tight supplies pushing the price above 100 euros on Friday morning.

Despite the fall in price for February, longer-term contracts are still rising. The German year-ahead power price is up over 10% this week, suggesting the cost of supplying the continent is set to stay high longer term.

©2022 Bloomberg L.P.