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This newsletter was published 22.6.2022 at 16:39pm CEST
The current prices on the European carbon market are as follows:
Volatility in EUAs has contracted slightly, however market often sees liquidity spikes with mean reverting tendencies, signalling low participation number. Quarterly option expiry was pretty calm with last three days being range bound. Market has been trying to pin June expiry at 85 EUR level with open interest just above 3 million allowances in the past two days, however sellers have been successful in keeping price from rising above that. Despite bearish macroeconomic sentiment, EUAs have been behaving in their own manner, reflecting high power prices, tight gas supply and up-trending coal. Higher temperatures across central Europe in the past week might have increased power demand. However, heatwave is forecasted to move down to southern parts of Europe in the next week as we just entered calendar summer to keep power demand high. Primary auctions still attract a lot of interest, since it has become uncommon to see cover ratios below two. This alone could be considered as a bullish information, since a lot of spot demand remains unmet on daily basis. Higher interest rates across the globe have also reflected in EUA market, as cost of carry keeps increasing. Time-spreads are being pushed further and further out. Rising energy prices along with high inflation across the globe could lead to challenging times ahead, for industries as well as households with many countries already partly regulating extremely high retail prices.
German power prices are up by 14.50 EUR since last week, with the front year contract trading at 245.25 EUR/MWh. API2 coal prices are up by 38.25 USD since last week, with the Cal23 contract trading at 260.00 USD/tonne. EUR/USD is up by 130 points since last week and is currently trading at 1.0560.
Price development of EUA Dec2022 futures contract