This newsletter was published 10.2.2021 at 18:39pm CEST
The current prices on the European carbon market are as follows:
EUAs are back at all time highs. Energy complex optimism coupled with cold weather was enough to push prices towards 40 EUR/EUA. Additional buying pressure might have come after German officials said that free allocation is expected only after end of April and could be stretched until September. This is bad news for anyone that was relying on exchanging their free Phase 4 allocation for Phase 3 allowances to cover 2020 emissions. Instead, companies will have to go to the market and buy allowances in this case. All this puts lots of buying pressure up until the end of compliance period in April, however question is what happens after. Front loaded buying could mean that companies will be selling later in the year, on top of that UK auctions are likely to start later in the year too, brining even more supply to the market. Options market has seen big changes since last week. Open interest increased by 59 million EUAs on all maturities, with calls taking the lead at 39 million EUAs. Existing open interest numbers suggest that prices may easily move past 40 EUR, with open interest of 37 million EUAS, and possibly continue their way up until 50 EUR/EUA where open interest is at 33 million. This would be in line with analysts’ forecasts so it remains a viable scenario. Downside seems limited for now but prices might eventually revisit the important breakout level at 33 EUR/EUA in the second half of the year.
German power prices are up 1.65 EUR/MWh since last week, with the front year contract trading at 53.50 EUR/MWh. API2 coal prices are up 2 USD since last week, with the Cal22 contract trading at 67.00 USD/tonne. EUR/USD is up 100 points last week and is currently trading at 1.2130.