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This newsletter was published 10.8.2022 at 17:58pm CEST
The current prices on the European carbon market are as follows:
EUAs are still caught in a supply shortage and thus prices are slowly inching up. The pace of rise has slowed down but volume has increased slightly since last week. It seems the story from last week is repeating, with power prices reaching new record highs, while gas and EUAs are following behind. Gas supply in Europe is still a big puzzle since the replacement turbine that was supposed to increase the Nord Stream pipeline flows from Russia has not been installed for almost two months now. Currently only one out of six total turbines is in operation and even the remaining gas flows are at risk. EU countries are already preparing for the worst and trying to fill up storages while it is still possible, however the solutions are only temporary, making in through the winter at best. Some hope still lies in Freeport, an important US LNG hub, coming back online in early October. Freeport was exporting around 70% of its supplies to EU and UK, rest went to Asia. Despite this, gas supply will not be high enough as EU imported around 40% of its gas from Russia in 2021 and currently the Russian flows have been reduced to a fifth. Outcomes and impact on EUAs are difficult to judge. On one hand, utilities will likely need to buy more spot as we approach the compliance deadline, apparent from their reduced forward hedging activity this year. Second option is great demand destruction where industrials will have to reduce their production, thus selling excess EUAs and in turn demanding less power generation, decreasing the need for utility buying. First scenario will be bullish for EUAs but in a short time frame. Second scenario might see slow yet continued selling, depressing the prices.
German power prices are up by 25 EUR since last week, with the front year contract trading at 430 EUR/MWh. API2 coal prices are up by 1 USD since last week, with the Cal23 contract trading at 264 USD/tonne. EUR/USD is up by 200 points since last week and is currently trading 1.0350.
Price development of EUA Dec2022 futures contract