Huge mistakes in HU+SEE Forward pricing - On July-2025 example: reasons behind, learning and earning on them
Hungarian futures are getting increasingly liquid - but despite rising liquidity, market still makes huge mistakes while pricing future products - Weeks, Months, Quarters, Cal. One of the good examples was pricing of July-2025. Fundamentally, July-2025 was priced plain wrong a month ago, and forward market was driven by short-term disturbances and sentiment induced by losses on short Weeks.
Within the one-month period, HU-DE spread collapsed by 30 EUR/MWh, while HU-ITA spread collapsed by over 20 EUR/MWh. If you made Short HU vs Long DE or Short HU vs Long ITA spread positions in early June, you made a nice profit on this spread.
Due to high volatility and uncertainty of EUA / Gas prices, we always advise HU-DE-ITA Spread trading in our Forward products trading strategies - as price difference of Hungary vs Italy and Hungary vs Germany is reflection of expected HU+SEE Balance / Grid / Import risks and shows just how bearish or bullish market participants are for some Future / Forward product while evaluating regional fundamentals.
Temperature forecasts for July-2025 are now much higher than 30 days ago - but bullish sentiment was gone.
Big question is - Were there concrete reasons for bullishness for HU July-2025 present in early June?
Answer - NO. In early June 2025, we published 60-page document called “Trading Strategy for July-2025”, fundamentally augmenting reasons for making short position in Hungary for July (Short HU vs Long DE/ITA)
WHY WAS MARKET SO BULLISH FOR JULY ONE MONTH AGO?
Overreaction on High spot spreads in Q2-2025 compared to Q2-2024 + fear of huge losses of short July-2025 + stop loss
Market was not understanding May-June 2025 settlement, ignored grid + thermal units maintenances and traded Hungarian July in “worst-case scenario” manner: July’s temperatures + May’s generation
SOME OF THE ELEMENTS WHICH MIGHT HAVE BEEN OVERLOOKED BY MARKET PARTICIPANTS WHILE PRICING HUNGARIAN JULY-2025 ABOVE ITALIAN MARKET
Temperature forecasts for July 2025 were not nearly as high as realized temperatures in July 2024. More importantly, July 2024 had specific situation of long-lasting heatwave occurring simultaneously in Greece and rest of the region
Availability of thermal units would be some 1500 MW higher than in July 2024.
Absolute price level for July 2025 is sufficient for all available fossil units to work
Better grid availability than in July 2025. Strong gird maintenance was in place in Austria and Hungary in July 2024, resulting with highly loaded 220 kV grid elements in Austria – causing frequent volatility of PTDfs in FBMC (we published many analyses about this)
Regulatory minRAM increase from the start of 2025
Huge increase of solar generation (especially “invisible” distribution grid solar)
New fossil units which to be available in July 2025, but were under construction/test phase in July 2024
Hydro generation prospects are bad for July 2025, but cannot be much lower even in worst case scenario
Exports to Ukraine and Moldova cannot be higher than in July 2024
Higher competition on the market: Higher availability of units + Lower load + Higher MaxExchange
WHEN DID THE BULLISH SENTIMENT FOR JULY-2025 START?
It started in Wk19-2025 (05.05.2025-11.05.2025) and continued throughout May
WHAT HAPPENED IN WK19-2025 TO CREATE BULLISH SENTIMENT?
After 3 weeks of on average 0 EUR/MWh HU-DE spread, HUPX suddenly settled 8.3 EUR/MWh above EPEX-DE in WK19.
Reasons: NPP Kozloduy entered maintenance, solar and wind generation were terrible, low night temperatures rising night consumption, grid maintenances, strong thermal units maintenance plan and negative spark / dark spreads resulting in record low gas and coal-fired generation.
NONE OF THESE FACTORS ARE APPLICABLE for July-2025, but loss on short WK19 induced bullish sentiment for July-2025.
WHAT HAPPENED AFTER WK19 TO KEEP BULLISH SENTIMENT?
Wk20 and Wk21 again generated loss on short. Again, for the reasons not applicable for July-2025
Coal-fired generation was record-breaking low. Reason: quite strong maintenance plan (2300 MW stronger than at the same time in 2024) and low absolute price level. Market ignored that absolute market price level of July would induce significantly higher coal-fired generation – at the end of May, July 2025 coal units revenues were 55 EUR/MWh higher than for WK19-Wk21 2025 (HU futures, EUA in WK24). Charts: Figure 1, Figure 2, Figure 3 (at the end of the document)
Gas-fired generation was exceptionally low: Reason: Too low price level and strongly negative spark spread. Market ignored that absolute price level for July-2025 would induce over 50 EUR/MWh higher revenues of gas-fired units for base-load profile than for WK19-Wk21 2025 (HU futures, EUA in WK24). Charts: Figure 4, Figure 5 (at the end of the document)
Solar generation was just terrible and far below expectations in May, resulting in unexpectedly high HU-DE spread in solar hours. Market ignored that year-on-year rise of installed solar in HU+SEE region is over 6000 MW and that July will have entirely different solar generation than May-2025. Chart: Figure 6 (at the end of the document)
Strong grid maintenances in Austria, resulting with lower MaxExchange in FBMC algorithm and limiting SEE imports in risky hours (H18-H24) compared to previous months. Market ignored that grid elements which were in maintenance during July/August 2024 were actually being in maintenance in May/June 2025, significantly reducing FBMC risk of July 2025 on the account of May / June 2025. Chart: Figure 7
Hydro generation was well below average. This was actually justified fear as July 2024 had average hydro generation. Again, market ignored reservoir saving due to low consumption and low price level. In recent years SEE hydro generation profile changed strongly, so despite lower average hydro than in July 2024, generation in critical high-priced hours would not be much lower in July 2025. Chart: Figure 8 (at the end of the document)
GR-ITA cable was in maintenance since late February 2025. This cable is highly valuable for late hours (H18-H24) and 500 MW of inflow of lower-priced energy reduces power of high-priced Greek offers to determine the market price across the region. Market ignored that GR-ITA cable was coming back in operation in early June and will be in operation during July-2025
WHAT HAPPENED AFTER WK23 TO INDUCE BEARISH SENTIMENT?
Early June (late Wk23 and Wk24) HU-DE and HU-ITA spread started going down and Hungarian market for July 2025 entered into the bearish trend – and continued onward. What happened? Simply, high losses on Long Weeks against settlement. Market was pricing Hungarian WK23 at Italian price level, but settlement was some 15 EUR/MWh lower than Italian market:
Solar generation finally picked up (Figure 9)
Higher price level induced higher coal and gas fired generation (Figure 10, Figure 11)
Still extremely low lignite fired generation, but still no extreme price spikes on HUPX.
Units in 3 Nuclear power plants in maintenance – but still no extreme price spikes
Hydro generation remained terrible – but still no extreme price spikes (Figure 12)
Huge wind generation decline– but still no extreme price spikes (Figure 13)
Extreme (heatwave) temperatures in Wk23 – but still no extreme price spikes (Figure 14)
Strong Austrian grid maintenances and reduced MaxExchange DE>HU – but still no extreme price spikes (Figure 15)
GR-ITA cable had late start – no extreme price spikes
FUNDAMENTAL ANALYSIS + EVALUATING MARKET SENTIMENT
For five weeks in a row (WK22-Wk26), traders were losing money on Long HU vs short DE while trading Weeks against settlement. This inevitably led to strong bearish sentiment collapsing July spread and traders revising their standpoint for July-2025 price. THE QUESTION IS: With huge price drop, was profit potential on Short already depleted and how low can the Hungarian July-2025 go on settlement?
We modelled HU+SEE Power Balance and Hungarian price expectation for July-2025 in both heat-wave conditions and outside heatwave in our forecast reports – feel free to contact us and we will send you full July25 forecast report - so you can get a better feel how we do forward products analytics and forecast.
For each front-month product, we publish 4 revisions of front-month forecast during the month until delivery starts – and every morning we publish front week forecasts within our Day-ahead forecast reports: so you can optimize your front-month position against settlement throughout the month.
Our trading strategy document - month ahead HUPX price forecast and trading recommendations for August 2025 is available as of 30.06.2025.
Figure 1: Amount of coal-fired units in scheduled maintenance (HU+SEE) during Wk19-Wk21 2025 and at the same time in 2024.
Figure 2: Coal-fired generation in the region (HU+SEE) in Wk19-Wk21 2025, same time in 2024 and in July 2024
Figure 3: Revenues of coal-fired units after EUA in Wk19-Wk21 2025 and July-2025 revenues (HU futures, EUA, Gas futures in late WK21)
Figure 4: Revenues of gas-fired units after EUA in Wk19-Wk21 2025 and July-2025 revenues (HU futures, EUA, Gas futures in late WK21)
Figure 5: Gas-fired generation in the region (HU+SEE) in Wk19-Wk21 2025, same time in 2024 and in July 2024
Figure 6: Solar generation change July 2025 vs May 2025 (Forecast for July-2025, without prosumer generation included)
Figure 7: MaxExchange DE>HU (working days) in April 2025, and WK19-Wk21
Figure 8: Hydro generation profile in May 2025 and July 2024
Figure 9: Solar generation rise in WK23 vs Wk22 and Wk21
Figure 10: Coal-fired generation rise in WK23 vs Wk22 and Wk21
Figure 11: Gas-fired generation rise in WK23 vs Wk22 and Wk21
Figure 12: Hydro generation change WK23 vs Wk22 and Wk21
Figure 13: Wind generation change WK23 vs Wk22 and Wk21
Figure 14: Consumption change WK23 vs Wk22 and Wk21
Figure 15: Impact of Austrian grid maintenances on DE>HU MaxExchange
Thoughtful post, many thanks Marko for continuous effort!