EUAs broke all-time high : sustainable upward trend or temporary bullish run ?
EUA prices have broken their all-time high of 65.77€/t on Nov.15th on a combination of rising gas prices, option trading and some positive sentiment from the COP26 amid a lack of sellers.
Despite the current strong bullish trend, the rally could be temporary as it not fundamentally supported :
Higher gas prices should not trigger additional gas-to-coal switching as all gas power plants are already far behind coal in the merit order for this winter,
The bullish news supporting the gas market was on the supply side not demand,
No impact on the EU ETS is expected to result from the COP26’s “Glasgow Climate Pact”.
A downward correction could hence be expected in the short term, although the nearing annual EUA auction break and the large call options’ open interest at 70 and 75€/t strike prices could quickly limit the downside.
Source : Data from Engie EGM and ICE
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In this report, you’ll find key synthetic data and comments covering fundamentals, technical analysis and short term price outlook for the EUA market.
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