This newsletter was published 30.11.2022 at 16:12pm CEST

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

Nearing of December option expiry and late year buying activity have sparked strong bullish bias, that has been persisting since the start of last week. EUAs surged by more than 10 EUR from monthly lows in more or less a straight line and are currently eyeing 85 EUR, highest price since late August. Buyers have been relatively aggressive almost every day, until sellers gave in or run out of offers.  The move could be result of technical buying, as prices strongly rebounded of 50-day moving average and breached 200-day moving average with relative ease. Apart from technical reasons, market could very well be affected by fundamentals, especially below average temperatures in Northern Europe, lack of wind power production and, therefore, surge in coal power generation. This thesis could be confirmed by slight increase in power prices and rally in coal, which is up by more than 40 percent from November lows. Bullish trend in coal could prevail in the near future, especially if China decides to discontinue zero covid policy. December and therefore yearly option expiry in EUA could also play a role in market behaviour in the upcoming days. Largest strikes for this quarterly expiry are at 60 and 80 EUR, both with open interest of more than 18 million allowances. Despite that, market could trend to even higher strikes if current conditions remain unchanged.

German power prices are up by 22.00 EUR since last week, with the front year contract trading at 367.50 EUR/MWh. API2 coal prices are up by 37.00 USD since last week, with the Cal23 contract trading at 267.00 USD/tonne. EUR/USD is up by 30 points since last week and is currently trading 1.0380.

Price development of EUA Dec2022 futures contract