Spanish lockdown squashes front month energy prices

LONDON (ICIS)–Expectations of plummeting demand in Spain due to a national lockdown hit the front month power contract by more than €3/MWh on 16 March.

Spain went into a 15-day nationwide lockdown on Monday, with workers asked to stay home to battle the spread of the coronavirus.

The April ’20 power contract fell from €32.85/MWh on Friday 13 March to €29.65/MWh on Monday afternoon, based on financial OTC trades observed by ICIS.

Spain’s front quarter power contract traded around €34.05/MWh on Monday afternoon, down from €35.95/MWh last Friday. The Cal ‘21 price was also seen trading more than €1/MWh lower than Friday’s close on Monday.

Demand for gas is also expected to be impacted by the lockdown. A fall in demand for gas would also affect Spain’s power market as the two are closely linked. Traders based in Spain and working from home said it was still too early to determine just how much demand would fall in the longer term.

On Monday as the new measures began, power demand was expected to reach 671GWh, according to data from grid operator REE. While this was more than a 4% drop week on week, demand was still up year on year. In 2019 on the Monday of the same week, demand was 668GWh.

Gas demand was higher due to low wind, but similar price falls were seen on the front month. The PVB April ’20 contract closed 2.3% lower than the previous session.