Carbon Weekly Newsletter

This newsletter was published 17.2.2021 at 18:37pm CEST

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

EUA prices are consolidating near yearly highs. Prices briefly looked above 40 EUR/EUA on Monday, but have fallen since. Market has been reaching record prices almost every day in February so a small correction is healthy and nothing unusual. Power and gas prices declined as well on warmer weather forecasts. Additionally, options flow since last was more bearish week than usual. Open interest in puts increased by 40 million EUAs on all strikes and expires, while call volume was very concentrated at 50 EUR/EUA strike with 13 million EUAs added, while 8 million got added on other strikes in total. Although ratio was heavily in favour of puts this time, total open interest data still shows that calls are seeing more interest at 307 million EUAs total, while puts are at 231 million EUAs. If we see further call buying next week, while this dip unfolds, it could signal that market is in dip buying mode and expects new record prices soon. If put volume keeps increasing, we might see a bit bigger correction. 50-day average price is lower at 34 EUR/EUA, while 200-day average is unlikely to be seen for some time. It is currently at around 28 EUR/EUA. There are now less than two and a half months until companies must submit allowances to cover their 2020 emissions. Buying pressure will likely get stronger as we get closer to the deadline, while dips might attract early buyers that are still on the sidelines. Either way, prices have support in the next two months, while there is only limited auction supply resistance to the upside.

German power prices are down 1.50 EUR/MWh since last week, with the front year contract trading at 52.00 EUR/MWh. API2 coal prices are down 3 USD since last week, with the Cal22 contract trading at 64.00 USD/tonne. EUR/USD is down 100 points last week and is currently trading at 1.2030.

Price development of EUA Dec2021 futures contract

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