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This newsletter was published 13.9.2023 at 16:04pm CEST
The current prices on the European carbon market are as follows:
After nine consecutive down days, EUAs finally found at least some support. Market has been approaching 80 EUR per tonne but failed to trade at the rounded level. EUAs reverted to the upside before Polish auction, which cleared just above secondary market. Trigger for buying activity was most likely short covering of investment funds which have increased their net short exposure since last CoT report. Position had been increased by 8 million tonnes in only five trading sessions and has breached 20 million tonnes. Support could be observed in related markets as well, especially front month gas and power. Reasons could be in prolonged maintenance of Norwegian pipeline, strike at Australian LNG facility and reduced operation of Freeport LNG terminal, due to low prices. Despite providing support in gas markets, all the news above had limited upside effect on front month prices due to full storages. The main risk remains in back products, especially if consumption jumps significantly. With European economy cooling down, this scenario remains unlikely, at least for the time being. Trading volumes in EUAs have been rising since beginning of September as we are approaching third quarterly option expiry of the year. It seems that market remains comfortable trading between 80 and 85 EUR per tonne, as fundamentals remain stable and unchanged. Largest strike for this expiry is at 80 EUR, with open interest of just over 12 million EUAs, followed by 75 EUR strike of 8.675 million EUAs, all of which are put options. Volatility usually increases before such events, and it would not be surprising if we experience sharper moves in the following days.
German power prices are up by 0.80 EUR since last week, with the front year contract trading at 128.50 EUR/MWh. API2 coal prices are up by 6.50 USD since last week, with the Cal-24 contract trading at 128.00 USD/tonne. Front year gas prices are up by 1.150 EUR since last week, with the TTF Cal-24 trading at 51.850 EUR/MWh. EUR/USD is up by 20 points since last week and is currently trading 1.0740.
Price development of EUA Dec2023 futures contract