EUAs recovered from 5-month low as compliance buyers stepped in

The European power spot prices surged near 340€/MWh yesterday, lifted by a combination of spiking gas prices, a wind shortage and a continuously weak nuclear availability. The day-ahead prices averaged 339.31€/MWh in Germany, France, Belgium and the Netherlands, +72.61€/MWh day-on-day.

Extending their record fall, the carbon prices dropped down to a 5-month low of 55€/t on Wednesday morning as financial players liquidated further their long positions to flee the EU ETS and raise cash to cover their losses and the surging margins calls in the other markets. Poland’s EUA auction held yesterday was even cancelled due to an insufficient volume of bids, highlighting the current lack of buying interest of the market’s participants.  The EUAs however promptly rebounded in the afternoon and gave back all of their morning losses, buoyed some short-covering and dip-buyers most likely from the compliance side finding the level of prices low enough to build length. The EUA Dec.22 eventually settled at 68.49€/t, -0.36€/MWh from the previous day.

In case you missed it, we publish yesterday evening our analysis “Carbon : an historic crash of emissions prices” explaining what were the drivers behind the recent collapse of EUAs and presenting the possible coming evolution of prices.

The conflict in Ukraine continued to spur an extreme volatility in the power forward market with the prices receiving strong but mixed signals from the decorrelated gas and carbon markets. Lifted by the spiking gas prices, most contracts nonetheless posted once again massive daily gains and are surging further this morning on soaring concerns over gas and coal supply halts.