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This newsletter was published 20.4.2022 at 16:33pm CEST
The current prices on the European carbon market are as follows:
It took several weeks and many failed attempts for EUAs to finally break well established trading range. Sellers at the upper extreme of 82 EUR were unable to absorb strong buying pressure, which started in the morning hours today. Price action has been extremely bullish the whole day, as EUAs moved more than 8 EUR from low to high without any considerable pullback and closed the unfilled gap from late February. Such activity could be caused by late compliance buying, when companies rush to get allowances before the deadline. Unlike last year, EU member states are more than three-quarters of the way for 2022 free allocation. Some entities, which tend to borrow current free allocation to meet obligations from previous calendar year, would face additional risk if allocations would be delayed again. Primary auctions are currently well covered and this may likely remain the case until late April. The largest three participants on daily auctions are non-financial institutions, which bought almost 50 percent of auctioned volumes last year. In 2021 top 10 auction participants accounted for 90 percent of auctioned volumes, while remaining 38 participants accounted for only 10 percent. Option activity, which was one of the main drivers in EUAs last year, is very muted at the moment. Largest open interest of 7.4 million allowances for June option expiry sits at 100 EUR strike and is followed by 80 EUR strike with 5.6 million open interest. Power and coal are currently most supported commodities in European energy complex, alongside EUA. Gas on the other hand experienced a slight correction, however it seems to be recovering from the low.
German power prices are up by 1.50 EUR since last week, with the front year contract trading at 203.00 EUR/MWh. API2 coal prices are up by 16.50 USD since last week, with the Cal23 contract trading at 250.00 USD/tonne. EUR/USD is up by 30 points since last week and is currently trading at 1.0850.
Price development of EUA Dec2022 futures contract