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This newsletter was published 15.6.2022 at 16:10pm CEST
The current prices on the European carbon market are as follows:
Failed regulatory attempt to flood the market with fresh supply from Market Stability Reserve has brought fresh wind to EUA. Market seems to be less nervous and liquidity spikes occur less frequently. The only consistent supply are primary auctions, with slightly reduced volume since beginning of June. Lack of selling pressure and bullish fundamentals have created a firm up trend, persisting for a week already. This caused price to increase from sub 80 EUR to more than 86 at the upper extreme, in linear fashion. Another reason that could be affecting pricing of emission allowances is a provisional deal, that has been struck between the largest political groups in European Parliament a day ago. The new proposal is set to be scheduled for a vote in the coming week, on June 22. By coincidence this date aligns with June quarterly option expiry and a big increase of volatility could be experienced around that date. Even though open interest cannot be comparable a year prior, there are still some price levels toward which market may tend to move. Those strike levels are at 80, 85 and 90 EUR respectively. Similar to EUAs, a bullish momentum has affected UK emission allowances as well. After sidewise price action, market seems to have found support at 81 GBP per tonne and started up-trending from there. Although there is no fundamental connection between the markets, EUA and UKA continue to be positively correlated.
German power prices are down by 5.00 EUR since last week, with the front year contract trading at 230.75 EUR/MWh. API2 coal prices are down by 3.75 USD since last week, with the Cal23 contract trading at 221.75 USD/tonne. EUR/USD is down by 310 points since last week and is currently trading at 1.0430.
Price development of EUA Dec2022 futures contract