Expectations of increased rainfall combined with falling gas prices are weakening Nordic forward power prices.

(1) Due to the decline in European natural gas prices and increased rainfall forecasts, the forward electricity prices in the Nordic market—which heavily relies on hydropower—decreased on Wednesday. The base load power contract for the next quarter was quoted at €91.2/MWh, while the annual contract was quoted at €56.3/MWh. (2) Nordic reservoir water storage continues to lag behind average levels, with the water storage deficit expanding to 17.91 TWh on Wednesday. Institutions predict that rainy and windy weather will return later next week, leading to mixed bullish and bearish signals in the market. (3) Rainfall can increase reservoir capacity and boost hydropower output, thereby suppressing electricity prices, but low temperatures will drive up electricity demand. Meteorological agencies believe it is unlikely for prolonged hot and dry weather to occur before early September. (4) Germany’s next-year electricity benchmark contract rose against the trend; European day-ahead electricity prices benefited from an estimated increase in solar and wind generation, resulting in a decline. The European carbon benchmark contract edged down slightly to €81.9 per ton. (5) European natural gas supply is abundant and demand remains weak. Dutch and UK wholesale natural gas prices are fluctuating within a narrow range, while geopolitical tensions are expected to ease, with the outlook for related conflicts somewhat cooling.