Italian Hydro Reservoir Deficit to 5-Year Avg Widens

Italian hydro stocks over 27 May-2 June (week 22) increased for the fifth consecutive week- albeit at a slower pace – with stocks widening their deficit to the 5-year avg to the highest this year. The rise of stocks could continue to be slowed as maximum temperatures in Rome could spur the need for cooling – increasing power demand.

• Hydro reservoir levels were at 2.56TWh of capacity, up by 0.11TWh on the week, compared to a 0.12TWh weekly gain in week 21 and a 0.17TWh rise in week 20. Despite this, stocks are at their highest since week 5 of this year.
  
• But reservoir levels widened their deficit to the 5-year average to 0.36TWh- a yearly high so far in 2024- from 0.32TWh in the previous week.
• And the difference from the same week to 2023 also widened to a 0.56TWh deficit from 0.44TWh.
• Italy generated around 1.38TWh of hydro over 27 May-2 June, compared to 1.35TWh over 20-26 May – slightly weighing on stocks –, as PV and wind generation fell to 715GWh and 318GWh, respectively, from 735GWh and 380GWh, in the previous week, Terna data show.
• This led to thermal output increasing to 1.68TWh from 1.52TWh in week 21 as Italian gas storage capacity rose to 149.6TWh, or 75%, full on 3 June compared to the 5-year average of 62.8%, according to Gas Infrastructure Europe, cited by Bloomberg.
• Hydro stocks could be dented this week (3-9 June) as Italian power demand is forecast to rise on the week to around 29.69GW from 29.33GW over 27 May-2 June.
• Max temperatures in Rome are anticipated between 26-28C over 6-14 June – potentially leading to increased cooling demand over the period.
• Lower hydro stocks on the year and compared to the 5-year seasonal norm have placed upward pressure on Italian power, with the front-month power contract at a premium to all central-western European power markets.