The European power spot prices edged down yesterday on an early bearishness of gas prices and forecasts of warmer temperatures and strong solar generation offsetting the ongoing wind shortage and weaker nuclear availability. The day-ahead prices averaged 220.93€/MWh in Germany, France, Belgium and the Netherlands, -12.92€/MWh day-on-day.
The carbon prices timidly rose throughout Tuesday with support for the falling gas prices and firmer equities, but the three markets strongly reversed at the end of the session after reports emerged that Russia had suspended gas flows to Poland. The sudden rebound and subsequent sharp rise of gas prices indeed triggered a sell-off in the carbon market, once again highlighting their negative correlation, as investors offloaded their allowances while the plummeting equities may have provided additional pressure. The EUA Dec.22 closed at 82.71€/t, -0.75€/t from Monday’s settlement and continues its steep fall this morning, driven down by the escalating geopolitical tensions with the Russian gas flow to Bulgaria now also halted which might be interpreted by the market as more demand destruction to come. The benchmark contract has already fallen below 80€/t and further losses could be expected later today if the gas market continues to rise.
The power forward market was also impacted by the news, first observing a steep retracement alongside the gas market before recouping all its early losses at the end of the day.
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