This newsletter was published 4.10.2023 at 17:23pm CEST

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

Carbon emission allowances have been entrenched in a persistent downtrend for an extended period. The benchmark futures contract for December 2023 recently breached a significant psychological barrier at 80 EUR per tonne. However, sellers encountered substantial buying interest below this level. This steadfast support can be attributed to the fact that in 2023, the market experienced only three brief dips below 80 EUR, rendering it a pivotal level with almost two years of significance. In 2022, prices predominantly revolved around the 80 EUR mark, whereas this year, the 80 EUR price point presented an attractive buying opportunity for market participants due to its substantial deviation from the yearly average price. Consequently, this led to robust buying activity in the morning hours, triggering a sharp rally of nearly 3 EUR and activating a multitude of buy orders along the way. Furthermore, data from the ICE exchange revealed that investment funds largely maintained their net short exposure, with only a marginal reduction of approximately 2.5 million tonnes. However, it is worth noting that the market was lower at the time this data was published compared to a week prior. This lack of trend reversal despite financial funds’ buying may be interpreted as bearish sentiment. When considering long-term fundamentals, the outlook for European Union Allowances (EUAs) appears to lean in a bearish direction. Typically, larger auctions tended to offer discounts compared to prevailing spot prices. Concurrently, power and gas futures continued their descent, and underground gas storages remained relatively well-stocked. Macroeconomic sentiment further compounded the bearish outlook, as government bond prices plummeted to levels not witnessed since 2007, just prior to the Global Financial Crisis. Taking into account all these factors, it should not come as a surprise if EUAs persist in their downward trend, occasionally punctuated by short-lived upward rallies.

German power prices are down by 6.30 EUR since last week, with the front year contract trading at 117.00 EUR/MWh. API2 coal prices are down by 11.00 USD since last week, with the Cal-24 contract trading at 118.00 USD/tonne. Front year gas prices are down by 3.595 EUR since last week, with the TTF Cal-24 trading at 45.005 EUR/MWh. EUR/USD is down by 20 points since last week and is currently trading 1.0500.

Price development of EUA Dec2023 futures contract