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This newsletter was published 22.11.2023 at 16:43pm CEST
The current prices on the European carbon market are as follows:
The past week witnessed a continued decline in EUAs, hitting a new annual low. Despite this trend, intraday fluctuations were notable, with prices falling after up-ticks. Interestingly, today daily auction attracted considerable attention after a prolonged period, however it still offered some discount. More bids were placed than usual, which might be due to short covering or genuine demand due to anticipated colder weather outlook in Central Europe. Forecasts for December are increasingly bullish, with expectations of a cold weather impacting the region in about a week. Historically, such weather patterns have bolstered prices, signalling a potential similar effect this time. Investment funds are adjusting their positions according to CoT report. They reduced net short exposure for the first time in five weeks, which is a notable change. This shift suggests that the 75 EUR might be attractive profit taking level and it might continue to act as a support. Additionally, EUAs are nearing their annual auction pause, likely extending for at least a week—a factor that might to some extent strengthens the market sentiment. Last auction this year is scheduled for December 18 and further auctions may resume in the second half of January 2024. As we approach December and consequently the last quarterly option expiry this year, additional volatility could be expected in EUAs. Open interests at major strikes resemble volumes seen a year ago, roughly at 20 million allowances at levels with most open interest. Unless there is a considerable surge in utility interest, EUA prices might remain range bound. However, a significant uptick is possible if utilities stop unwinding their hedges.
German power prices are down by 8.95 EUR since last week, with the front year contract trading at 108.00 EUR/MWh. API2 coal prices are up by 1.75 USD since last week, with the Cal-24 contract trading at 110.75 USD/tonne. Front year gas prices are down by 3.460 EUR since last week, with the TTF Cal-24 trading at 44.850 EUR/MWh. EUR/USD is up by 200 points since last week and is currently trading 1.0870.
Price development of EUA Dec2023 futures contract