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This newsletter was published 20.10.2021 at 18:23pm CEST
The current prices on the European carbon market are as follows:
EUA prices have not changed much week to week, but intraday volatility has increased. In the past week we have seen three swings of around 4 EUR within a trading day. All this movement is in sync with the magnitude of other energy markets, which are highly volatile as well. Although movement in gas and power prices is much lower than two weeks ago, it still hovers significantly above normal levels. Recent falling coal and EUA prices have pushed profitability of coal power plants to extremely high levels, while natural gas power plants keep falling further behind coal. EUA has normally been an instrument of incentive for less burning of coal in favour of switching to gas, but recently the correlation has completely broken down. Ceteris paribus, if EUA were to fall by 50% from current levels, coal would still be a favourite to gas. A weird phenomenon which would normally incentivize more coal power generation, and thus more demand for EUAs, this time does not work. This is partly due to supply shortages of most energy commodities and logistical barriers of delivering the goods quickly enough to stop the bottlenecks. It seems that all generation capacities that could be running, are running. As we approach winter, cold spells could further worsen the already tight market, so we can expect more volatility ahead in all energy markets. Considering high demand for power generation, EUAs could remain well supported.
German power prices are up by 3.15 EUR since last week, with the front year contract trading at 126.00 EUR/MWh. API2 coal prices are down by 15.00 USD since last week, with the Cal22 contract trading at 136.00 USD/tonne. EUR/USD is up by 80 points since last week and is currently trading at 1.1640.
Price development of EUA Dec2021 futures contract