EU carbon rebound Tuesday — the biggest ever — reverses slightly on Thursday (1)

EU carbon futures down almost 4% to 70.37 euros a ton Thursday morning.

STOXX Europe 600 is down 1.2% today.

Engie comment:

The combination of warmer temperatures, soaring wind output and sharply retracement gas prices drove the European power spot prices down yesterday. The day-ahead prices averaged 326.40€/MWh in Germany, France, Belgium and the Netherlands, -123.18€/MWh day-on-day.

Buoyed by their bullish momentum from the previous day, the EUAs extended their sharp rebound on Wednesday and rose by nearly 7% as participants continued to anticipate and price a higher coal-fired power generation as a substitute a of potential halt in Russian gas supply, while an overall agreement among traders that the bottom had been reached just below 60€/t spurred some renewed buying interest in the market. The rapid recovery was also attributed to short call options sellers buying the underlying (the Dec.22) as prices grew to hedge their positions. After a short-lived retracement in the afternoon, the EUA Dec.22 closed the session at 73.18€/t, +4.67€/t from Tuesday’s settlement. 

The ICE published its Commitment of Traders report yesterday, indicating the opened positions of the market participants held on Friday. As expected, the investment funds cut massively their net long position to flee the carbon market and raise cash, reducing it by 72% from the previous week to only 6.6mt, suggesting they were indeed behind the historic fall of carbon prices observed last week. 

Meanwhile, the power forward prices tracked the falling underlying gas contracts amid most unchanged Russian gas flow (despite the recent fears of disruption) and forecasts of mild and windy weather.

Photo by Markcos Gonu00e7alves on Pexels.com

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