EUAs eroded early gains on falling equities

The power spot prices surged near 300€/MWh in northwestern Europe yesterday, lifted by forecasts of a wind surge combined with a strong demand and higher gas prices. The day-ahead prices averaged 290.13€/MWh in Germany, France, Belgium and the Netherlands, +45.15€/MWh day-on-day and +54.04€/MWh from the previous week.

The EUAs started the week on a bullish tone, rising by 2.4% to a two-week high on Monday morning with support from the sharply rising gas prices as the tension between Russia and Ukraine continued to fuel supply concerns in the market. The plunging equities however took hold of the carbon market in the afternoon and the emissions prices quickly gave back all their early gains to eventually close at 84.02€/t, -0.45€/t from Friday’s settlement. Both gas and financial markets are firmer this morning but the upside could be limited for carbon prices as the coal-to-gas switch range is already way above carbon prices, preventing additional gas-to-coal switching in case of higher gas prices due to supply issues, while the market should remain cautious of further losses in equities which could push some speculators to offload EUAs.

The power forward prices posted hefty gains along the curve tracking the rising gas prices and early gains of EUAs.