Carbon market was marked by a lack of strong direction

The European power spot prices continued to slowly rise yesterday amid forecasts of slightly easing (but still strong) wind output and weak nuclear availability, although the decent solar and hydro generation expected today offset part of these supports. The day-ahead prices averaged 164.30€/MWh, +8.20€/MWh day-on-day with the German prices still hovering just below the clean coal coast for 38% efficiency coal power plants.

Ignoring the soaring energy complex as Russia’s military forces entered the eastern region of Ukraine and Germany subsequently halted the Nord Stream 2 certification process, the carbon prices were instead seen heading down yesterday morning and hit as low as 88.10€/t despite the auction clearing with 17-cent premium over the secondary market, possibly pressured by early but sharp losses in the financial markets. The uncorrelated weakness was however only temporary and the EUAs recovered in the afternoon to eventually close at 89.77€/t, +9-cent from Monday’s settlement. Most market participants however pointed to the low exchanged volumes and narrow trading range of carbon prices considering the current significant geopolitical event, suggesting that although still well supported the market is rather undecisive on the direction to take. The emissions prices are sharply rising this morning, likely buoyed by the surging gas prices, but the 20-day moving average seems to cap the gains for now. Further gains later in the day are not to be excluded as some speculators could take advantage of the situation to push prices toward 100€/t, but do not forget that in case of sky-rocketing power and gas prices they are likely to offload EUAs in order to generate cash to make up for the soaring margin calls in the other energy markets.

The power forward market was also strongly lifted by the geopolitical news and posted hefty gains along the curve.