August 27, 2018 / 2:12 PM / 3 months ago

EUROPE POWER-Carbon, French nuclear tightness seen driving power curve higher

(Adds outlook comments, 2022 contact, links to Nordics, updates prices)

By Vera Eckert

FRANKFURT, Aug 27 (Reuters) - German forward power prices set record highs on Monday and European prices have further upside, traders said, as utilities and speculators continue to buy related carbon emissions certificates on expectations of tight supply from next year.

Germany’s 2019 contract jumped above the psychologically important level of 50 euros a megawatt hour and set an all-time high, as did the 2020, 2021 and 2022 contracts.

“There is a strong drive to buy up the CO2 market and that interacts with power, gas and coal,” one trader said. “I see higher prices yet as nobody is putting the brakes on.”

Trading in the European market was thin, however, with the UK fuels markets closed for a public holiday.

Germany’s 2019 baseload position, Europe’s benchmark, was 2.4 percent higher on the day at a contract record of 50.4 euros/MWh.

Germany’s 2020 contract jumped 2.6 percent to 46.9 euros , with the contract for 2021 up 1.7 percent at 45.6 euros, and 2022 at 47.1 euros, all three price being record highs.

The continuous German year-ahead position on the EEX bourse was at its highest level in six years.

The French 2019 position gained 2 percent to 55.15 euros, a new all-time high.

European carbon permits for December 2018 expiry, which generators must hold to cover their output, gained 5 percent to 21.7 euros a tonne.

Carbon broke above 20 euros to hit a 10-year high last Thursday, driven by EU reforms of the CO2 trading mechanism, stronger fuels prices, higher demand and reduced volumes from auctions.

European delivery AP12 coal for 2019 was in a bid-ask range of $89.6-91.5 a tonne after its close of $89.5.

Traders said the market was also nervous because there had been a series of reactor outage delays in France in recent trading days.

“France remains tight and if the dry weather continues, that causes additional supply problems in European markets,” one said.

French nuclear availability has fallen three percentage points to 60 percent of total availability since Friday.

Nordic power prices also increased on a sustained period of low water reserves while further south in Europe, dry weather restricts cooling water volumes and hampers commodity transports.

German baseload for Tuesday delivery, at 65.6 euros/(MWh), was 18.7 percent above the price paid for Monday.

The equivalent French contract was up 8.1 percent at 69.2 euros. (Reporting by Vera Eckert Editing by Louise Heavens and Susan Fenton)

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