Carbon Weekly Newsletter

This newsletter was published 22.3.2023 at 16:14pm CEST

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

First quarterly option expiry in 2023 was quite uneventful, since market gravitated towards 90 EUR for almost 5 trading sessions. March options finally settled at 89.63 EUR, as participants had no interest to push prices higher. Due to mixed fundamentals and distress in global economy, EUAs seem to be well balanced at the moment and compliance buying supports market only on major dips. Daily trading activity has been steadily rising since beginning of March and is currently averaging volumes of more than 20.000 lots on December 2023 futures contract. Normally this increases liquidity and reduces volatility, however recently we have seen sessions steadily surpassing 3% daily ranges. Investment funds are switching positions often as well with a 12 million tonnes reduction in net positions in a week. Daily EUA auctions have also provided participants with mixed signals, since there were many in the last couple of days which offered substantial discount, as well as a few which cleared at a premium to prevailing spot market. This could be interpreted as balanced market in stressful macroeconomic environment, caused by distress in banking sector. Quite a healthy level of interest can be observed in UKAs as well, since market tends to absorb all the selling pressure, while auctions clear above the secondary market. Other markets in the European energy complex remain down trending, especially Brent crude oil and TTF, while front year German power futures remains flat. Cheaper energy has been usually a sign of cooling economic activity, which might be the case, especially due to rising interest rates.

German power prices are down by 1.75 EUR since last week, with the front year contract trading at 133.50 EUR/MWh. API2 coal prices are up by 2.00 USD since last week, with the Cal24 contract trading at 133.00 USD/tonne. EUR/USD is up by 270 points since last week and is currently trading 1.0790.

Price development of EUA Dec2023 futures contract

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