Profit taking drove EUAs back down to 90€/t

Except in France where prices edged down on expectations of milder temperatures, the power spot prices posted slight gains in north western Europe yesterday, buoyed by forecast of falling wind production. The day-ahead prices averaged 197.30€/MWh in Germany, France, Belgium and the Netherlands, +11.61€/MWh day-on-day.

The EUAs collapsed by 6.33% with a day’s low at 90.26€/t on Wednesday as further losses in the gas market and news that the EU might consider stricter rules to limit prices spikes pushed speculators to take their profits from the significant rally that had brought the Dec.22 up by 22% over the past three weeks. Peter Liese, the MEP in charge of guiding the EU ETS reform through the Parliament, indeed stated “Maybe we need to sharpen [Article 29a] to provide more predictability against price shocks. It’s important to start a debate, to find a good solution and then to implement it”. His formulation however suggests that even if such intervention were to be agreed by the Council and Commission (which we don’t expect at the time), it would take a lot of time to be implemented and we hence continue to see such action as highly unlikely. The EUA Dec.22 eventually closed at 90.79€/t, -6.14€/t from Tuesday’s settlement.

The 90€/t capped the losses yesterday, and the correction is more likely to be induced by long-due profit taking (the RSI indicating overbought conditions since early-February) rather than a the market turning bearish. The carbon prices are now likely to consolidate before taking another shot at the 100€/t, and prices are already rebounding this morning.

The power forward prices unsurprisingly tracked the bearish gas and emissions markets and posted moderate losses along the curve.