Carbon prices retreated on fears of intervention and falling equities

Forecasts of stronger demand and slightly weaker renewable and nuclear generation buoyed the European power spot prices yesterday, although the German prices continued to observe a discount due to the country’s still strong wind generation expected to reach up to 41GW at the end of the day. The day-ahead prices averaged 183.05€/MWh in Germany, France, Belgium and the Netherlands, +27.86€/MWh day-on-day.

After a high opening amid soaring gas prices, the EUAs quickly started to drop as the falling equities, a weak auction and fears over the Parliament’s amendments to the EU ETS Article 29a (mechanism designed to control non-fundamentally based prices spikes) expected to be tabled by tomorrow weighed on the carbon market. The 90€/t support level however once again capped the losses and the Dec.22 benchmark partly recovered in the afternoon to eventually settled at 91.76€/t, still -1.11€/t from Friday’s close. The market is neutral this morning as participants are nervously waiting for developments of the Russia-Ukraine situation and for the Parliament’s amendment which could weaken the speculators’ buying appetite. Nonetheless, the reform is likely to take 1 to 2 years to be implemented which means that no additional supply should come to the market in the short-term, and carbon prices could be far from the triggering conditions by then.

The power prices extended rather decent gains along the curve, lifted by the bullish gas market.