This newsletter was published 15.11.2023 at 18:08pm CEST

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

Market was yet again surprised by increased net short position held by investment funds in today’s CoT report, despite a marginal upside correction witnessed at the close of the previous week. EUAs managed to secure steady support around the 75 EUR per tonne mark, prompting a bullish response from the market. The rationale behind move to the downside could be attributed to weaker underlying fundamentals, notably the unseasonably warm weather and robust wind power generation, which bolstered investment funds’ confidence in expanding their exposure. Week-over-week surge in the net short position, amounting to nearly 4 million tonnes, signifies a heightened sensitivity of EUAs to upward movements, particularly with the imminent annual auction pause. Despite the persistent mild weather outlook, the market appears exceptionally responsive to even subtle shifts, given the prevailing sentiment. Auctions have consistently cleared at or below secondary market levels, with notably low cover ratios, allowing most participants to secure purchases on the primary market. It’s been over a month since bids significantly outnumbered offered volumes on any of the EUA auctions. Day-to-day volatility has been also influenced by option activity, particularly as the market approaches the final quarterly option expiry in 2023. Notably, the largest open interest, surpassing 20 million tonnes, rests at the 70 EUR strike, closely followed by the 80 EUR strike, boasting an open interest of just over 19 million tonnes.

German power prices are down up 4.36 EUR since last week, with the front year contract trading at 116.95 EUR/MWh. API2 coal prices are down by 1.75 USD since last week, with the Cal-24 contract trading at 109.00 USD/tonne. Front year gas prices are up by 1.186 EUR since last week, with the TTF Cal-24 trading at 48.310 EUR/MWh. EUR/USD is up by 150 points since last week and is currently trading 1.0850.

Price development of EUA Dec2023 futures contract