Short-squeeze drove EUA prices near 90€/t

The European power spot prices inched up yesterday, buoyed by higher clean fuel costs and forecasts of weaker French nuclear availability and German wind production. The day-ahead prices hence averaged 230.49€/MWh in Germany, France, Belgium and the Netherlands, +12.32€/MWh day-on-day.

The power forward prices received support from the rebounding gas and coal markets and the steep rise of emissions prices, posting moderate gains along the curve.

The carbon prices jumped by 6.2% and hit up to 89.06€/t on Tuesday with an unusual positive correlation with the rest of the energy complex, although the sudden upward move was attributed mainly to a strong auction and a short-squeeze of participants expecting a correction once the compliance deadline passed. Opening on the bullish side, the EUAs’ rise was indeed fueled by the morning primary sale clearing 36-cent above the secondary market spot price and with a particularly strong 2.91 bid coverage, way above the 1.90 year-to-date average and the highest in two months. The rally extended into the afternoon with numerous participants pointing to the market being short-squeezed after the long players left the market early March and compliance buying interest was reduced by the end of the compliance season. The EUA Dec.22 closed the day at 88.19€/t, +5.15€/t from Monday’s settlement.

A correction on profit-taking is not to be excluded in the short-term, yesterday’s surge having pushed EUAs in the higher hand of their new 80-90€/t trading range and near overbought conditions (RSI at 67 at the time of writing) while the carbon prices outlook remains neutral with strong bearish risks that would materialize if further Russian gas supply contracts were terminated for not respecting the new rouble payment requirement.