Profit taking drove EUAs back in middle of the trading range

The European power spot prices are mixed for today compared to Friday as the dropping nuclear availability and higher clean gas costs supported the French and Belgian prices while the contracts in the Netherlands and Germany faded on forecasts of strong solar generation. The day-ahead prices hence averaged 315.65€/MWh over the four countries, -1.71€/MWh from Friday and -33 cents week-on-week.

The power forward curves also observed mixed variations during the last session of the week, marked by a significantly low liquidity, a bearish morning and a late surge driven once again by supply concerns for this winter. Most contracts were seen posting losses, tracking an early weakness from the gas market and the falling emissions prices. Boosted by the low exchanged volumes, the German cal23 was particularly volatile on Friday, dropping from 300€/MWh to 290€/MWh in the morning but jumping back in the afternoon to reach 310€/MWh post-settlement as the gas market sharply rebounded. 

Meanwhile, the carbon prices dropped by 5% on Friday in a downward move seemingly fueled by the market’s low liquidity, triggered by a very weak auction result (-0.74€/t compared to secondary market) and attributed to profit-taking following the 4-day bullish rally of the week. The EUA Dec.22 closed the week at 85.58€/t, -4.58€/t from Thursday but +2.15€/t (+2.6%) from the previous week. The long-overdue correction that took place on Friday pushed the carbon benchmark contract out of his overbought conditions and back to the middle of the 78-92 trading range that has been prevailing since mid-April. The short-term outlook is hence back to neutral as the carbon market should remain torn between the supportive energy complex due to the reduced gas supply and the fears of recession and resulting demand destruction. On the policy side, with the European Council’s position now disclosed the Fit for 55 negotiations between the three EU entities could start as soon as July, although we expect most of the discussion to take place from September.