EU Carbon Threatens All-Time High; Could Drop if Power, Natural Gas Declines: Redshaw


EU carbon allowances are seen threatening their all-time high in “coming weeks” after surging last week, as lower auction volumes squeeze supply during August because of the summer holidays.

Still, the market prices are vulnerable to declines in power or natural gas, according to Redshaw Advisors.

Here is the outlook from Tom Lord, a trader and risk manager at Redshaw, distributed after market settlement on the evening of Friday, Aug. 6.

Outlook: Although it has not kept pace with the wider energy complex over the last couple of months, Carbon has still been tracking these markets intraday. With the strength seen of late in longer term European power markets it looks likely that EUAs will challenge the recent all-time-high of €58.64 again at some point over the coming weeks. However, the fact that Carbon has not kept pace with the wider energy complex means that if we see a significant correction in one of European power or gas markets downside could be swift. We will analyse this week’s price action and the outlook for next in more detail in Monday’s WeeklyRed.

EUA Closing price: €56.94
2021 average closing price: €45.68
Tom Lord
Trading and risk management

I added emphasis above.

For Daily Red’s website:

Dec. EU carbon futures from ICE Endex (euros per metric ton)

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