EUAs extended their fall on fears of additional supply

The European power spot prices inched down yesterday amid weaker clean gas costs and forecasts of lower demand. The day-ahead prices hence averaged 208.56€/MWh in Germany, France, Belgium and the Netherlands, -2.66€/MWh day-on-day.

The power forward prices posted moderate losses along the curve, weighed by the fading gas markets and plummeting carbon prices.

The EUAs extended their steep fall on Thursday morning as bearish sentiment from the EU Commission’s proposal to fund part of its RePowerEU plan by selling allowances from the MSR continued to drive the prices down (see yesterday’s daily news for more details) while a very auction provided additional pressure on the market. The downward move however stopped midday after the technically oversold Dec.22 benchmark contract hit its lower Bollinger band, and the carbon prices were seen recovering in the afternoon. The EUA Dec.22 closed the day at 83.18€/t, -1.46€/t from Wednesday’s settlement.

This week political turmoil is likely to strengthen the carbon market’s indecisiveness since the additional supply implied by the Commission’s package would offset the more ambitious target and ETS reforms just voted by the Parliament’s ENVI while all proposals still need the approval of the other EU entities with little chances to be agreed on for the most extreme ones. Therefore, despite their recent progressive return the speculators could stay away again from the market as fear of market access limit and additional supply is likely to dampen their confidence in the “one way bet” they thought carbon prices were.