This newsletter was published 1.11.2023 at 16:32pm CEST

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

European carbon prices have been steadily declining due to weak fundamentals and a prevailing bearish sentiment. Unusually warm weather for this season, coupled with weak demand and robust renewable power generation particularly from hydroelectric and, to a certain extent, wind sources, have exerted considerable downward pressure on the entire European energy complex. Notably, front-month gas and power prices have plummeted by over 15 percent in the past week alone. During clear bearish trend EUAs experienced some sudden price surges. One such surge occurred recently on a day without a primary auction. The Commitment of Traders (COT) report revealed an increase in short positions held by investment funds, prompting a brief attempt to squeeze the bearish positions. However, this effort was short-lived, and the spike above €80 per tonne was swiftly reversed. For as long as the market aligns with the prevailing bearish sentiment and underlying factors, a significant reversal to the upside seems unlikely. Most auctions have consistently cleared at or below the secondary market prices, potentially confirming the current lack of demand. In contrast, the UKA auction saw a different outcome today, with auction price clearing well above secondary market. With only three auctions remaining in 2023, the allure of low prices has attracted many eager buyers who see an opportunity to purchase near the market’s lows. It’s worth noting that the last time UKAs cleared at a premium to the secondary market, it caused a robust upward trend that persisted for 13 trading days. In less than two weeks, prices surged by almost 50 percent before eventually retracing.

German power prices are down by 10.85 EUR since last week, with the front year contract trading at 115.65 EUR/MWh. API2 coal prices are down by 6.50 USD since last week, with the Cal-24 contract trading at 119.50 USD/tonne. Front year gas prices are down by 5.420 EUR since last week, with the TTF Cal-24 trading at 48.500 EUR/MWh. EUR/USD is down by 30 points since last week and is currently trading 1.0550.

Price development of EUA Dec2023 futures contract