Carbon Weekly Newsletter

This newsletter was published 19.1.2022 at 16:28pm CEST

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

Trading volumes rose quite a bit during past week, however market still experienced some liquidity issues. Order book is very thin, therefore market moves easily on very small directional buying or selling. Apart from aggressive buying, seen yesterday afternoon, EUAs tend to trade around 80 EUR mark at the moment. This is also the biggest open interest level in options with around 25 million EUA. Any major deviations from this price have been reversed, most likely due consensus of unclear direction. Auctions in the past week cleared mostly below secondary market and offered some discount. Cover ratios have been high and ranging between 1.21 and 1.62, however bids at auctions were mostly placed below prevailing spot market. This might indicate that there is enough demand for EUAs, but it all seems that market participants have been unwilling to pay higher prices. Bullish tendencies have come down a bit in comparison to the end of last year, even though gas storage reserves are in constant decline. Other energy markets have also performed poorly so far in 2022 with only crude oil showing gains of around 15%. Equity markets are similarly in a risk-off mode as bond yields everywhere are climbing up. This sentiment suggests that prices of EUA might come down a bit more in the short term, however market remains undersupplied and will likely continue trending up over the year.

German power prices are up by 1.00 EUR since last week, with the front year contract trading at 116.00 EUR/MWh. API2 coal prices are up by 12.50 USD since last week, with the Cal23 contract trading at 105.50 USD/tonne. EUR/USD is down by 80 points since last week and is currently trading at 1.1340.

Price development of EUA Dec2022 futures contract

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