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EU carbon prices inch closer to symbolic Eur100/mtCO2e mark


Allowances for Dec 2023 near six-month highs on strong technical signals

Support could falter on higher auction volumes, warmer weather

  • Author
  • Eklavya Gupte
  • Editor
  • Jonathan Fox
  • Commodity
  • Energy Transition LNG Natural Gas

Carbon prices under the EU Emissions Trading System have made steady gains, inching closer to Eur100/mtC02e as technical factors continue to outweigh some bearish signals, an analysis by S&P Global Commodity Insights found Feb. 17.

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Platts, part of S&P Global, assessed EU Allowances for December 2023 near a six-month high Eur97.85/mtCO2e Feb. 16, the highest since Aug. 19. Prices have remained above Eur90/mtCO2e since Feb. 1, data showed.

EUAs were trading higher in a range of Eur97.25-98.42 mtCO2e on ICE Webex during morning trading Feb. 17 .

Despite bearish pressure building amid warmer-than-average forecast temperatures, strong option interest was offering support, analysts at S&P Global said.

"We continue to expect EUAs to fall next month as seasonal reductions in power sector demand combine with a further 15% increase in monthly auction volumes -- but upside support from compliance demand and investors should temper losses," they said in a recent note.

Auction volumes have remained robust in recent weeks.

Cleared prices in the Feb. 16 EU auction rose to Eur92.85/mt CO2 equivalent, another year-to-date high, with 2.409 million CO2 allowances sold.

Mixed signals

Some traders are still expecting an upward momentum to prices, but this trend will only be temporary, they said.

"When you look at the closing gap between the clean spark and dark spreads and the continuous flow of liquified natural gas coming to the continent... as well as warmer weather forecasts for upcoming weeks, an orthodox view would be that the EUAs should retreat to lower levels," Vertis Environmental Finance Senior Carbon Emissions Trader Gregory Idil said.

But Idil said the daily candle pattern on the graph clearly indicates the formation of a "bullish flag technical signal," which is a very strong indicator that a "reinvigorated upward momentum" is likely.

European natural gas spot prices moved lower Feb. 16 as expectations of a cold snap hitting Northwest Europe over the end of February dissipated.

Platts, part of S&P Global, assessed the benchmark Dutch TTF month-ahead price at Eur51.45/MWh Feb. 16, down from an all-time high of Eur319.98/MWh in late August.

The latest weather forecast for Northwest Europe points to temperatures averaging 4 degrees Celsius above seasonal norms over Feb.16-March 2. The latest forecast saw a revision to the Feb. 22-25 dates where temperatures were expected to dip below seasonal norms, according to Custom Weather.

Similarly, temperatures across Southern Europe are expected to average more than 2 C above seasonal norms over the same period, according to the weather data provider.