Carbon Weekly Newsletter

This newsletter was published 27.1.2021 at 18:52pm CEST

The current prices on the European carbon market are as follows:

EUA prices stay unchanged for another week. All correlated markets are basically unchanged from last week although some volatility was observed between the period. Auctions are due to restart on Friday. Although analysts were forecasting lower prices once auctions restart, continuous strength of broad market suggests that EUAs may keep trending up as well. Prices are now around 6% away from all time highs, reached on January 12 this year, and almost everything points to further gains in the future. Options activity has exploded after the last expiration in mid-December last year. Open interest has increased by 116 million EUAs on all maturities, with puts getting majority at 76 million EUAs. However, most of the open interest, which now stands at 389 million EUAs, is below the current market price and it favour of puts. This might increase the velocity of the move to the downside if it materializes, but then again, until market conditions remain favourable, the risk remains to the upside above 35 EUR/EUA. Above that level there are a total of 143 million EUAs of call open interest that may need to get hedged with increased intensity by the market makers who are likely short those calls. Volatility is here to stay and with open interest growing at a steady pace, likely to cause bigger moves in either direction in the next months.

German power prices are down 0.25 EUR/MWh since last week, with the front year contract trading at 49.75 EUR/MWh. API2 coal prices are unchanged since last week, with the Cal22 contract trading at 69.25 USD/tonne. EUR/USD is unchanged last week and is currently trading at 1.210.

Price development of EUA Dec2020 futures contract

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