EUAs collapsed on 2022 free allocation start

The European power spot prices sharply rebounded yesterday on expectations of much weaker nuclear availability, although the still very high renewable production dampened the bullish factor. The day-ahead prices averaged 153.43€/MWh in Germany, France, Belgium and the Netherlands, +48.53€/MWh day-on-day.

The EUAs fell by 3.8% on Thursday as reports that some member states have began issuing the 2022 free allowances to the eligible industrial installations triggered a sell-off. The sharp bearish move was also fueled by the market still digesting and evaluating the potential impacts of Peter Liese’s amendment proposal to the cost containment mechanism Article 29a and by the EUA Dec.22 benchmark contract breaking several technical supports. The EUA Dec.22 closed the day at 86.44€/t, -3.42€/t from Wednesday’s settlement. If the technical indicator MACD is pointing to further downside, a rebound is not to be excluded today as the EUAs dropped in technically oversold conditions yesterday. Moreover, the selling interest from the compliance players should be rather limited as industries (other than cash-strapped companies) are more-likely to store their just-received free allowances in anticipation of higher carbon prices to come due to the market’s rapidly decreasing supply.

The power forward prices tracked the sideways variations of the gas market with early gains followed by a retracement and eventually a late recovery. Most of the curve contracts posted daily gains with only the calendar prices edging down due to a weaker rebound at the end of the session.

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