To infinity and beyond !

Buoyed by the soaring gas and carbon prices, the European power spot prices rebounded yesterday with additional support from forecasts of slightly lower wind output. The day-ahead prices hence averaged 339.51€/MWh in Germany, France, Belgium and the Netherlands, +30.60€/MWh day-on-day.

The power curve prices posted hefty gains once again on Wednesday, driven up by the steep rise of gas and carbon prices amid continuous supply concerns pushing the French contracts for November and December now near 1000€/MWh, implying a substantial number of hours with curtailment this winter.

The EUAs indeed provided additional support to the power prices as their bullish momentum from the previous day quickly drove them toward 90€/t yesterday. Fueled by a combination of technical buying and increased hedging demand for coal-fired power production, the upward move stopped when the benchmark contract reached the targeted level midday and retreated just below the upper Bollinger band in the afternoon as profit taking took over the market. The EUA Dec.22 eventually closed at 88.35€/t, +0.95€/t from Tuesday’s settlement. We might see further downside today since the rally seems to have been triggered by the Council successful vote earlier this week, but the ministers agreed on common position in line with market’s expectations and less ambitious than the proposal from the Parliament. Nonetheless, the Commitment of Traders report published yesterday showed that the compliance players have significantly increased their hedging volumes, likely anticipating a higher coal-based power production as a consequences of the reduced gas use to come.