This newsletter was published 28.11.2023 at 16:36pm CEST

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

European emission allowances have been consistently printing new yearly lows over the past week. The substantial selling pressure appears linked to investment funds increasingly taking larger gross and net short positions—boosting their bets by about 10 percent week-on-week. Another significant factor contributing to this decline is the selling of major utilities. Reports indicate that RWE, Germany’s largest utility, halted its strategic hedging of lignite power plants. Additionally, power and gas prices have seen a downward trend, notably due to weakened industrial demand, unseasonably warm temperatures, and robust power generation from renewable sources. Wind power generation has remained relatively steady while heating needs stayed low. This premise finds support in weak auctions and limited participation. Cover ratios consistently below 1.75 have become the standard, with minimal interest in primary supply. Not long ago, cover ratios above 2 were a daily occurrence, which supported prices. However, the current trend appears to be hastening the decline. 70 EUR mark was for a long-time strike with largest open interest for December option expiry and the market seems to be gravitating towards the level. At this point it would not be surprising if market continues trading in downward trajectory, as reversal seems to be unlikely.

German power prices are down by 5.95 EUR since last week, with the front year contract trading at 102.05 EUR/MWh. API2 coal prices are down by 3.00 USD since last week, with the Cal-24 contract trading at 107.75 USD/tonne. Front year gas prices are down by 2.995 EUR since last week, with the TTF Cal-24 trading at 41.855 EUR/MWh. EUR/USD is up by 100 points since last week and is currently trading 1.0970.

Price development of EUA Dec2023 futures contract