(Bloomberg) -- French power prices are showing bearish sentiment as strong generation from hydropower and nuclear keeps prices in check for the colder months.
The contract for delivery in November — when the heating season is typically in full swing — has dropped by 23% since Sept. 2, shrugging off concerns about colder weather ahead. Heavy rainfall has boosted the outlook for hydropower, with French reservoirs at their highest level for the time of year since at least 2014. The nation’s nuclear fleet has also shown months of steady output.
Still, geopolitical risks remain a factor, following a significant escalation in Middle East tensions in recent days and uncertainty over Europe’s pipeline natural gas supplies from Russia. These issues have helped buttress gas prices, limiting the decline in German power prices relative to those in France. Robust gas storage levels in Europe have also shielded the impact of the fuel on power.
“The geopolitics provides a bit of an unknown, and has sustained gas prices at an uncompetitive position versus coal,” said Daniel Muir, an analyst at S&P Global Commodity Insights. “That’s just supported strong storage levels, so supply isn’t looking overly strained.”
The French contract for November fell 2.68% to €75.30 per megawatt-hour, data from Epex Spot SE show. The equivalent in Germany dropped 1.08% to €87.22.
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