Cold weather continued to affect demand in Nord Pool’s sales areas. In the Baltics, average monthly electricity prices continued to rise. In the trade areas of Latvia and Estonia, the average monthly electricity prices increased by 10% and were uniformly 59.15 EUR / MWh. In the Lithuanian trade area, the average monthly electricity price was 59.31 EUR / MWh, increasing by 11%. In the Baltics, the hourly price range ranged from 21.08 EUR / MWh to 249.98 EUR / MW.
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In February, the average electricity prices of the Nord Pool system increased by 2% to 46.84 EUR / MW. Fluctuations in electricity prices in certain Nord Pool trading areas were affected by market demand and the share of generation in cold weather. In the Nord Pool region, electricity consumption increased by 9.2% compared to February of the previous year and by 10.3% compared to February 2019. At the same time, development in the Nordic countries was 9.9% lower than a year earlier. In the Nord Pool region, the higher price increase was limited by higher development at wind farms, which increased by 28% compared to January, while by 21% lower compared to February. Reservoir water continued to decline, but is still above the long-term norm. In the Baltics, the dynamics of electricity prices were influenced by the level of electricity prices in neighboring countries and the electricity balance. In addition, higher electricity flows were observed from Sweden’s SE4 area to Lithuania by 27% and from Poland by 15%, while 13% lower from Russia and the Kaliningrad region.
Volatility in future electricity prices
Future Nordic electricity prices were volatile in February. The main factors influencing the prices were forecasts for colder weather conditions and lower precipitation, which at the beginning of the month affected the decrease of the hydrological balance from 6.2 TWh to 3 TWh. At the end of the month, however, the level rose to 4.7 TWh above normal as soon as forecasts for warmer and more rainy weather appeared.
In February, the prices of electricity system futures contracts (Nordic Futures) for the March contract fluctuated, and during the month the contract closing prices ranged from 30 EUR / MWh to 42.65 EUR / MWh, the average price was 35.55 EUR / MWh. The average system price of the contract in the 2nd quarter of 2021 was unchanged – 28.11 EUR / MWh, the closing price of the contract decreased to 23.65 EUR / MWh at the end of the month. The average futures price of the 2022 system in February was 26.42 EUR / MWh, and at the end of the month the contract price was 25.50 EUR / MWh. The average price of Latvian electricity futures for the February futures contract decreased by 1% to 47.14 EUR / MWh, the closing price of the contract increased to 44.60 EUR / MWh. In February 2022, the price of Latvian futures increased by 1% to 49.41 EUR / MWh, at the end of the month the contract price was 48.13 EUR / MWh.
The demand for electricity in the Baltics continues to grow
Due to the continuing cold weather, electricity consumption in the Baltics as a whole increased by 5% to 2,490 GWh in February compared to February last year. In Latvia, electricity demand increased by 2% to 624 GWh compared to February 2020. In Estonia, consumption was 7% higher to 798 GWh, but in Lithuania it was 4% higher than a month earlier. In conditions of higher demand, the total electricity production in the Baltics was unchanged compared to the previous month. In Latvia, electricity generation decreased by 2%, producing 583 GWh per month. In Estonia, development volumes increased by 2% to 524 GWh. In Lithuania, electricity generation decreased by 1% to 354 GWh compared to January. In the previous month, total generation in the Baltics covered 59% of total electricity consumption, in Latvia the ratio of generation to consumption was 94%, in Estonia 66% and in Lithuania 33%.
The Daugava tributary without changes
In February, the average inflow into the Daugava was 453 m3 / s, which was 3% above the multi-year average inflow level. Although the rainfall is low, a larger snow cover contributed to the inflow stability. However, compared to the inflow in February 2020, this year it was 50% lower. Electricity generation in February Latvenergo hydroelectric power plants were unchanged from the previous month or produced 190 GWh. However, development volumes were 46% lower than in February of the previous year. The nature of production was determined by the tributary of the Daugava. Electricity generation Latvenergo TEC was 287 GWh, which was unchanged from January, while production volumes were more than twice as high as in February of the previous year.
Rising carbon quotas and oil prices
The price of the Brent Crude Futures crude oil futures contract rose 13% to $ 62.28 / bbl in February, and the contract continued to rise to $ 66.13 / bbl at the end of the month. The rise in oil prices in February was due to OPEC + member states’ decision to continue restricting oil production until April, with Saudi Arabia voluntarily restricting oil production. In the middle of the month, a cold wave in the US state of Texas affected the cessation of oil production and exports. In addition, news of the expected economic recovery was increasingly available at the end of February, which was a major factor in the rise in prices.
The average price of a coal futures contract (API2 Coal Futures Front month) decreased by 4% to 65.03 USD / t in February, the closing price of the contract was 65.25 USD / t. Coal prices fell mainly due to lower demand in Asia, which was affected by the easing of import restrictions in China. Gradually, the market began to return supplies from Colombia.
In February (Dutch TTF), the average price of the March natural gas futures contract decreased by 11% to 17.54 EUR / MWh, and the contract ended with a higher price of 16.38 EUR / MWh.
The decline in natural gas prices was driven by expected higher deliveries of liquefied natural gas (LNG) as demand in Asia declined. In addition, weather fluctuations and higher development of renewable energy sources led to lower market prices.
The price of European Emission Allowances (EUA Futures) EUA Dec.21 in February increased by 13% to 37.96 EUR / t, and at the end of the month the price of allowances was 37.28 EUR / t. In February, the rise in carbon prices was driven by high demand, which came not only from higher demand due to weather conditions at the beginning of the month, but also from market dynamics in commodity-related commodity markets, where the main focus was on rising oil prices.
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