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This newsletter was published 18.1.2023 at 17:28pm CEST
The current prices on the European carbon market are as follows:
EUAs have been mostly trading in a range since the beginning of the year, however today we finally saw a bigger move up. Expected temperatures in central Europe dropping below average coupled with less renewable power generation helped to spark a rally in gas, power and EUA prices. While all had a bit negative recent weeks due to warmer weather, things have started to turn around, apparently trapping some short positions in the markets with it. Besides weather, interest on daily auctions is staying high. Cover ratios near or above factor 2 have been common and auctions mostly cleared at or premium to secondary market. Data shows number of auction participants and number of bids increasing to levels not seen for almost a year. Partly, this could be due to rising costs of funding. If front year contract was quoted around 50 ticks above spot at the beginning of 2022, it has started this year with around 300 tick premia. This means that cost of hedging with futures contracts is now considerable and some companies with extra cash would rather hold spot than pay a high futures premium. At the same time, this gives companies less incentive to sell their spot holdings now and buy back before the compliance deadline in April. At the moment it seems that EUAs still have room to go higher, however prices are nearing 50 and 200-day moving averages, which could act as a technical resistance. If the cold weather persists and we clear the technical hurdles above, then prices above 90 EUR will become a real possibility.
German power prices are down by 5.00 EUR since last week, with the front year contract trading at 174.00 EUR/MWh. API2 coal prices are up by 9.00 USD since last week, with the Cal24 contract trading at 176.00 USD/tonne. EUR/USD is up by 70 points since last week and is currently trading 1.0840.
Price development of EUA Dec2023 futures contract