EU Carbon and Power Market

Carbon Quotas Prices The last blog post ended by noting that the EUA prices are expected to stay below EUR 60/t due to downward pressure. However, what we saw was a significant uptick in prices for the Dec 24 EUA contract.  The rise started with carbon prices hitting a two-week high at EUR 64.10/t as a mix of geopolitical pressure and fundamental factors tightened the market. An analyst noted that overall the fundamentals have not changed much, and prices were expected to fall as long as Iran's retaliation of the Israeli bombing of its consulate in Syria does not lead to strong escalation.  Further, on the 12th of April, the Dec 24 EUA hit a three-month-high of EUR 71.75/t, and later that week EUR 74.90/t, the highest since the 8th of January. The main drivers behind this shift were energy fundamentals, particularly gas prices. With carbon prices being linked to gas and power, the reports of  Russia's attacks on gas storage facilities and power plants in Ukraine trig...

 Carbon Quotas The benchmark contract for EUAs (Dec 24) has experienced some volatility in the last three weeks.  For a moment, momentum turned from bearish to modestly bullish, breaking away from its previous sideways trend of EUR 55-62/t -  as prices peaked at 65.78/t on the 25th of March.  The increase could be explained by rising gas prices following attacks on a Ukrainian gas storage facility executed by Russia, and the Easter break disrupting supply as no EEX auctions were held on Good Friday or Easter Monday. However, analysts say that the sharp increase was tied to a short squeeze on the positions held by "speculators".  On the 3rd of April, the Dec 24 contract was down to EUR 57.21/t on the Ice Index, which is the lowest since the 14th of March. Prices are currently below the EUR 60/t zone where it is expected to stay due to downward pressure caused by milder winter temperatures and high gas supplies. This leads to weaker gas prices and coal-to-gas...