Curve Rebounds on Colder Weather Forecast

European forward power prices rebounded on Tuesday, supported by forecasts for colder weather in late January, early February as well as stronger carbon and coal markets.

Germany's Cal' 16 baseload position, the benchmark for European electricity prices for delivery next year, last traded up 50 cents at 32.05 euros/MWh.

The equivalent French contract was up 25 cents at 38.10 euros/MWh.

"There is some cold weather on the horizon which will keep near-dated power contracts supported and emissions (carbon) seem to have breached some key technical levels," a trader said.

"And coal is up after trading lower earlier," he added.

Carbon prices were up 4.85 percent at 7.13 euros per tonne, having broken through the 7 euro threshold for the first time since Jan. 5.

European Union nations sold 2.918 million spot EU carbon permits on EEX at 6.77 euros per tonne each on Tuesday, the German energy exchange said.

Point Carbon meteorologists said their new model forecast colder weather for the second half of January and early February than previously expected.

In the spot market, Germany's contract for Wednesday delivery was 5.7 euros up at 31.50 euros/MWh, while the equivalent French contract was 4 euros up at 38.75 euros per MWh.

Temperatures were expected to drop by 2.7 degrees Celsius in Germany on Wednesday to 5.5 degrees, and by 1.2 degrees in France to 7.7 degrees, boosting power demand.

Wind power supply was expected to drop by 4.3 GW in Germany, Point Carbon figures showed.

Elsewhere, French Energy Minister Segolene Royal said France should build a new generation of nuclear reactors to replace the country's ageing plants, the first time a government member has clearly approved this option, which sent EDF shares up more than 5 percent.

Reporting by Michel Rose