This newsletter was published 2.2.2021 at 18:55pm CEST

The current prices on the European carbon market are as follows:

EUA auction clears at a record high premium. The week started slow but things turned around fast on Tuesday after various hedge funds involved with carbon markets expressed their extremely bullish views for the future. Prices started going up almost vertically and extreme optimism was evident on Wednesday as well. Auction cleared at around 1.5 EUR premium to the secondary market which is an extreme outlier compared to the usual discounted price. Lack of volume on the ask side clearly shows not many participants are selling even as prices trade at record high levels. The only supply at the moment seems to be auctions. Contrary to the forecasts from last year, prices gained more since auction restarted last Friday, than they did in around month and a half long auctionless period through December and January. This may seem a bit illogical but it shows that the market is not long enough yet and 3 million EUAs offered on the daily auctions easily get absorbed. With equity and oil markets still pushing up, momentum on European energy markets could continue for some time. Option open interest keeps growing rapidly. Additional 7 million EUAs were added in puts since last week, however calls increased drastically at over 21 million EUAs. Combined all strikes at all maturities total around 417 million EUAs of open interest on options traded on ICE. Increased options activity suggests even bigger moves ahead.

German power prices are up 2.35 EUR/MWh since last week, with the front year contract trading at 51.85 EUR/MWh. API2 coal prices are down 4 USD since last week, with the Cal22 contract trading at 65.00 USD/tonne. EUR/USD is down 70 points last week and is currently trading at 1.2030.

Price development of EUA Dec2021 futures contract