Carbon Weekly Newsletter

This newsletter was published 10.1.2024 at 16:41pm CEST

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

Just a few days before daily auctions resume, EUAs took another hit, dropping by nearly 10 percent in only 5 trading sessions. Risk of insufficient gas supply during the winter has reduced to the minimum since underground storages remain more than 80 percent full. Weather models and renewable power generation sit near the long-term averages, which has been additionally pushing prices downwards. It seems that there is sufficient supply of EUAs, especially due to persistent deindustrialisation and a general tendency to generate more power from green sources. For the past few months EUAs have been consistently positively correlated to front month gas prices and it seems, that gas prices may affect the pricing of carbon in the near term as well. According to weekly CoT report, investment funds slightly decreased their net short exposure, however the main change was a big increase of short positions held by commercial participants, such as energy trading houses and utilities. However, a real test for the market will be when auctions finally resume. Many buyers have been postponing their purchases due to prolonged compliance period in 2024 and might start to engage at current prices. EUAs are currently trading just around 70 EUR per tonne, which is well below long-term moving averages and near 2023 lows, from where market rebounded for more than 10 EUR during the Christmas holiday. Similarly, a persistent bearish sentiment could be observed in UKAs, which have been trading lower by the day. First UK auction of the year cleared at a premium to secondary market, which momentarily subdued selling pressure and provided some short-term support.

German power prices are down by 5.11 EUR since last week, with the front year contract trading at 88.34 EUR/MWh. API2 coal prices are up by 8.60 USD since last week, with the Cal-25 contract trading at 104.00 USD/tonne. Front year gas prices are down by 0.100 EUR since last week, with the TTF Cal-25 trading at 34.150 EUR/MWh. EUR/USD is up by 30 points since last week and is currently trading 1.0950.

Price development of EUA Dec2024 futures contract

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