Carbon Weekly Newsletter

This newsletter was published 21.10.2020 at 19:23pm CEST

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

EUA prices tumbled below 25 EUR/EUA under intense selling pressure. While last week this level was tested many times and held, this week the selling pressure has increased and buyers were overwhelmed by big sell orders hitting the market. Losses are showing up on other markets as well, which could be linked to increasingly tighter government restrictions around Europe as infection rates keep climbing. This likely means that GDP targets for 2020 will have to be revised down once again which is a negative factor for EUA prices. Charts shows that a further decrease to 21 EUR/EUA is possible before finding the next level of support. While the price drop since the beginning of October has been quite slow paced, volatility is picking up and daily ranges are getting bigger. Looking at options open interest, we can that there are three levels that are standing out for the yearly expiry that takes place two months from now. Those are 20, 25 and 30 EUR strikes which have 35, 24 and 26 million EUA of open interest, respectively. As we are moving away from 25 and towards the 20 EUR area, the pull from those options may increase the velocity of the move.

German power prices are down 1.4 EUR/MWh since last week, with the front year contract trading at 38.60 EUR/MWh. API2 coal prices are unchanged since last week, with the Cal21 contract trading at 59.00 USD/tonne. EUR/USD has moved up by 100 points since last week and is currently trading at 1.1870.

Price development of EUA Dec2020 futures contract
Yours sincerely,
Jan Kresnik 
Carbon Trader

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