Carbon Weekly Newsletter

This newsletter was published 13.10.2021 at 16:16pm CEST

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

After last week’s squeeze in energy commodities, the whole complex consolidated and remained range bound. Gas, crude oil, coal and subsequently power prices have retraced from peak by almost 50 percent, with natural gas likely being the main driver. The latter has been one of the best performing commodities in 2021, with year-to-date gain of more than 500% at the peak. European power prices have been following moves in gas for the last 6 months and caused many political debates about potential interventions. Dependency on fossil fuels can be illustrated by correlation between TTF natural gas and German Cal-22 power prices, which has breached 98 percent at the end of September. Soaring prices, along with higher margin requirements by exchanges and clearing houses, caused some market participants to liquidate positions, which might have been one of the reasons behind last week’s blow-off top. Although the initial nervousness about unusually expensive commodities and power was supressed by the news of more Russian gas inflows, the global supply remains tight. Liquid natural gas, which is used alternatively to pipelined gas and shipped around the globe, has reached record price and is still trading near highs. The largest coal consumer in the world, China, has been forced to import more than 30 million tonnes of coal in September alone, up by 76 percent in comparison to September 2020, putting even more pressure to rising prices. During the past week, EUAs traded mostly sub 60 EUR level, with price action reminiscent of those around option expires. Sharp drop from 65 EUR was followed by contracted volatility and carbon market is still waiting for another piece of news or fundamental driver, which could send price in either direction. Auctions in the past week have been mostly clearing around market price, offering no discount below secondary market. Last Wednesday has been second busiest day thus far in 2021, with more than 55 million EUAs traded in December 2021 futures contract alone. With winter around the corner and low gas storage facilities, the supply crunch could continue, especially if the flows from Russia remain mostly unchanged.

German power prices are down by 17.65 EUR since last week, with the front year contract trading at 122.85 EUR/MWh. API2 coal prices are up by 8.00 USD since last week, with the Cal22 contract trading at 151.00 USD/tonne. EUR/USD is up by 20 points since last week and is currently trading at 1.1560.

Price development of EUA Dec2021 futures contract


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