Continuing low spot prices impacted forward expectations despite the warnings of bushfires, a hot summer and possible shortages. Last October the forward market peaked, but this October is set for a downhill run as Spring conditions of plenty of wind and increasing sunshine prevail.
We have separated our monthly report into sections to make the read more bite size. This is the first part focused on the financial markets.
The highlights for the month are:
- forward prices generally rallied in the start of the month, and then declined in the second half
- the forward market premium over the spot price continued with Q3 spot prices failing to deliver against the forward market expectations which would make any long position holder nervous
- the volume of trades on ASX Energy was the second lowest in recent history (i.e.since Jan-21), while traditionally November is a high trading month as large customers organise Cal-24 positions, and market players finalise their Q1-24 and other positions
- The last week of September had a substantial price fall triggering high ASX Daily Variation Margin calls. On the 2 October, the Daily Variation Margin call was the highest in the last 10 weeks. Strong Daily Variation Margin calls cause significant favourable (or unfavourable) cash flows on trading entities
- LGC forward prices strengthened in the thinly traded Cal-26 and Cal-27 years, but softened in the more heavily traded front years
- After a strong upward run, VEEC prices seem to have stabilised as the market adjusts to the new rules; supply is expected to gradually increase with the higher incentive
