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This newsletter was published 1.2.2023 at 17:14pm CEST
The current prices on the European carbon market are as follows:
One-sided upward momentum in EUAs appeared to be a combination of massive short covering, according to weekly COT report and forward hedging due to colder weather forecast. Buy side support could also be observed in power and gas markets, which have been driven by the same fundamentals as EUAs. Carbon has rallied in a straight line from 83 to 97.55 EUR in the past 6 trading sessions, offering no substantial pullbacks. Market did however find short term technical resistance in the mid of the way up, at around 90 EUR from where prices stalled for a short period. Corrections to the downside have been short-lived and dips were reverted with ease, as offer side often turned out to be empty. Along with aggressive futures buying in EUAs that we have seen in the past week, auctions confirmed bullish narrative, since they usually cleared from 20 to 35 cents above prevailing spot prices. When market finally crossed above 90EUR it caused a sharp move a couple of euros higher, where December-23 futures contract finally settled at 93.01 EUR per tonne. For the reference, last time the same contract settled above 90 EUR was more than a month ago and only for one day. Interestingly, one the possible catalysts could be unusually strong UKA auction which cleared almost 1 GBP above secondary market. Such large premium might have caused panic in short-positioned participants, not only in UKAs but in EUAs. Once market started to move aggressively, options implied volatility has risen as well, adding to the upwards pressure.
German power prices are up by 19.50 EUR since last week, with the front year contract trading at 185.00 EUR/MWh. API2 coal prices are up by 8.00 USD since last week, with the Cal24 contract trading at 153.00 USD/tonne. EUR/USD is up by 50 points since last week and is currently trading 1.0920.
Price development of EUA Dec2023 futures contract