Carbon Weekly Newsletter

This newsletter was published 7.9.2022 at 16:11pm CEST

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

Fears of complete cut of Russian gas flows through Nord stream 1 have materialized as state owned Gazprom indefinitely discontinued distribution after alleged oil leak in the pipeline. Markets have somewhat reacted to the news, however amplitude of the moves would suggest many participants have already expected this to happen. European gas storages are at the moment 82 percent full, higher than early September last year, but still not much considering no Russian flows are expected. On positive note long-term weather forecasts are expecting milder winter, with precipitation. Those two factors could be of great importance, since they could reduce overall gas consumption during the winter. Fundamentals are not supportive of carbon prices, hence EUAs keep trending lower. Several more rounded levels have been traded through with ease, suggesting buyers could not absorb all the selling, let alone push prices more than a couple of euros. Along with reduced gas flows, reasons that might have affected price of EUAs could be larger auctions and possibility to introduce additional primary auction sales from MSR. The goal is to curb at least some pressure that industrials are under and fight inflation that way. Auction in the past week have without exception cleared below prevailing spot market, however, cover ratios have breached factor two a couple of times. Auctions are normally a good indicator of demand, and until results improve prices may keep weakening. Additionally, industry across Europe has started to get significantly impacted by the outrageous power prices and have in-turn started to decrease their output. This results in lower demand for EUAs and further price slide.

German power prices are down by 46.00 EUR since last week, with the front year contract trading at 524.00 EUR/MWh. API2 coal prices are up by 72.00 USD since last week, with the Cal23 contract trading at 332.00 USD/tonne. EUR/USD is down by 100 points since last week and is currently trading 0.9900.

Price development of EUA Dec2022 futures contract

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