POWER: Italian Hydro Stocks Slow Fall but Drop Inline to 5-Year Avg
Italian hydropower reserves last week – calendar week 5 – slowed the rate of their decline from the previous week, dropping by 0.10TWh to 2.53TWh as power demand in the region fell on the week.
- Reserves narrowed their deficit to the same week in 2024 to 0.09TWh from 0.15TWh in week 4.
- But stocks are now in line with the five-year average last week after being at a 0.02TWh surplus the week prior – hitting a new low so far this year.
- Stocks slowed the rate of their fall as demand dropped on the week at 33.53GW in week 5 compared to 34.36GW the week prior.
- However, there was no precipitation in Torino near Italy’s hydro-intensive region last week, compared to 0.5mm the week prior – limiting inflows into reserves. This is also below the 30-year norm.
- Looking ahead, the latest ECMWF weather forecast for Torino suggests precipitation to total 23.05mm over 3-9 February – which could reduce pressure on stocks.
- Italy’s hydro balance is forecast to end this week at -3.81TWh on 9 February, down from -3.78TWh in the previous forecasts. The balance is further expected to end at -4.32TWh on 20 February.
Wind generation in Italy for the remainder of this week is forecast between 0.962-2.17GW or 9-20% load factors, with output early next week at 5-12% load factors over 10-14 February, according to SpotRenewables.
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J.P.Morgan recommend “investors shift overweight intra-EMU exposure after the recent widening move and enter long 10-Year Spain vs. Germany.”
- They note that “intra-EMU spreads have been under pressure since the December ECB meeting.”
- They believe that “the widening was likely due to a combination of a relatively hawkish delivery from the ECB, heightened political uncertainty in France and liquidations of overweight tightener positioning. Also, the typical weak market liquidity around year-end likely exaggerated these moves.”
- Furthermore, they “remain of the view that heavy January supply will be well digested by the market, especially given attractive valuations after the recent sell-off/spread widening.”
SCHATZ TECHS: (H5) Fresh Cycle Low
- RES 4: 107.365 High Dec 12
- RES 3: 107.170 High Dec 20
- RES 2: 107.065 20-day EMA
- RES 1: 106.965 High Jan 3
- PRICE: 106.715 @ 10:27 GMT Jan 6
- SUP 1: 106.695 Intraday low
- SUP 2: 106.680 Low Nov 20 (cont)
- SUP 3: 106.645 Low Nov 18 (cont)
- SUP 4: 106.625 2.00 proj of the Dec 2 - 6 - 12 price swing
The current bear cycle in Schatz futures remains intact and recent weakness, including today’s fresh cycle low, reinforces this theme. The Jan 3 sell-off confirmed a resumption of the bear leg and sights are on 106.695, the Nov 20 ‘24 low (cont). Initial firm resistance is seen at 107.065, the 20-day EMA. A clear break of it would highlight a potential reversal. For now, short-term gains would be considered corrective.
