Mixed session for EUAs amid strong auction result and late retreat of gas prices

The European power spot prices rose yesterday amid forecasts of fading wind output, weakening French and Belgian nuclear production and increasing power demand. The day-ahead contracts averaged 156.09€/MWh in Germany, France, Belgium and the Netherlands, +24.28€/MWh day-on-day with the German prices presenting again a significant discount to the other NWE countries prices due to the still very strong wind production there.

The EUAs traded sideways between 88 and 91€/t on Monday as the daily auction clearing with a massive 31-cent above the secondary market erased the losses from the previously bearish morning, but a late retreat of gas prices drove the carbon benchmark contract back down at the end of the session to eventually close mostly flat from Friday at 89.68€/MWh (+24-cent). Failing to end the day above 90€/t, the EUA Dec.22 nonetheless managed to settle above its 5-day moving average which had capped the upside for over the previous week. The strong auction result also suggests there is some buying interest at the current level of prices, likely from compliance players taking advantage of the recent sharp correction of EUAs to buy allowances while they are well below their all-time high of 98.49€/t. The benchmark contract is hovering between its 5-day moving average and the 90€/t resistance this morning, torn between the sharp rise of gas prices due to the escalating tension in Ukraine and the collapsing equities.

On the power side, the forward prices tracked closely the gas market and political developments of the Russia-Ukraine situation. Despite an early correction, most of the futures contracts managed to post moderate gains thanks to an afternoon recovery.

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