Future energy prices rise as El Niño intensifies.

Energy prices are already reflecting the uncertainties caused by the advance of El Niño. While short-term contracts have fallen sharply, those expiring at the end of 2026 and the beginning of 2027 have risen amid expectations of an intensification of the climatic phenomenon.

According to an analysis by the energy trading platform BBCE (Brazilian Energy Trading Platform), rainfall in the Southern region has reached double the average expected for the period, putting downward pressure on prices for contracts with delivery in the coming months.

The contract for September fell 9,45%, from R$ 188,86/MWh at the end of July to R$ 171,01/MWh in the first week of August. In October, the drop was 6,42%, from R$ 252,77/MWh to R$ 236,64/MWh. For August, the price decreased 4,62%, from R$ 138,32/MWh to R$ 131,93/MWh.

Conversely, the prospect of a strengthening El Niño has increased caution among market participants regarding the medium term. The contract for December 2026 advanced 2,26%, from R$ 293,61/MWh to R$ 300,25/MWh. Meanwhile, the product for the first quarter of 2027 led the week's gains, with an increase of 2,68%, from R$ 299,08/MWh to R$ 307,09/MWh. The figures consider contracts negotiated between August 3rd and 7th.

This behavior reveals a distortion in the price curve: contracts with shorter maturities are declining, while those with more distant maturities are advancing. This movement shows that favorable hydrological conditions in the short term coexist with a greater perception of risk for the following months.

“We continue to see a curve torsion process at BBCE. The drop in prices for this and the next three months is directly explained by the rainfall regime in the South, well above the historical average,” explains Eduardo Rossetti, Director of Products and Institutional Relations at BBCE.

“On the other hand, the price increases for the end of the year and the beginning of 2027 reflect the growing uncertainty regarding the possible effects of a strong El Niño, whose prediction is becoming more concrete every day,” it adds. According to Climatempo, El Niño should reach its peak between October and December of this year.

The effects of the phenomenon vary across the country's regions. While the South tends to experience heavier rainfall and storms, areas in the North and Northeast may face drought, high temperatures, and an increased risk of wildfires.

The CMSE (Electricity Sector Monitoring Committee) reported that it has decided to reinforce preventive actions to guarantee the security of supply in light of the possibility of El Niño intensifying. According to the committee, there is a 70% probability that the phenomenon will gain strength in the second half of the year.

Among the measures announced is the reduction of outflows from hydroelectric plants. The strategy consists of releasing less water from the reservoirs, preserving storage levels and increasing the water security of the National Interconnected System in the coming months.

If El Niño reduces inflows to hydroelectric plants in the country's main basins, the system may become more dependent on sources with higher variable costs. At the same time, higher temperatures tend to increase electricity consumption, mainly due to the use of cooling equipment.

This scenario helps explain the appreciation of futures contracts and the search by market participants for protection against a potential rise in prices in the short-term market.

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