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This newsletter was published 6.7.2022 at 16:57pm CEST
The current prices on the European carbon market are as follows:
EUA prices have backed down since last week. Power and gas prices were increasing while EUAs were slowly drifting down, confirming the recent negative correlation. Gas flows to Europe keep decreasing, meaning some companies might be cutting their EUA exposure in anticipation of lower power output on the back of reduced gas flows. Liquidity in all markets is extremely low and could get lower as we enter reduced summer activity. Options activity has died down as well with only a few small transactions since last week. With volatility increasing on all global markets, EUAs may follow purely because of much reduced liquidity. Market is currently very vulnerable to news and with sentiment leaning towards negative, we could see bigger dips in case of such triggers. Inflation expectations have started so shift and bond yields have started to drop in effect. This has contracted time spreads in EUAs between Dec22 and Dec23 from around 4% to around 3% in the last two weeks.
German power prices are up by 53.5 EUR since last week, with the front year contract trading at 334.00 EUR/MWh. API2 coal prices are up by 16 USD since last week, with the Cal23 contract trading at 266 USD/tonne. EUR/USD is down by 300 points since last week and is currently trading at a two-decade low of 1.0170.
Price development of EUA Dec2022 futures contract