EUA finally climbed above 40€/t but eventually fell at the end of the session

The European power spot prices dropped significantly yesterday amid forecasts of stronger wind output, weaker demand and lower gas prices. Prices eroded 18.33€/MWh from Wednesday to 60.81€/t on average in Germany, France, Belgium and the Netherlands. The plunging gas prices also pressured the clean gas costs which fell by 2.87€/MWh to 51.81€/MWh for power plants with 50% efficiency.

The French power consumption rose by 2.58GW to 78.07GW on average yesterday, while the country’s nuclear generation improved by 0.33GW to 47.88GW. On the other hand, the German wind output eased by 3.48GW to 5.95GW.

Driven by a relatively strong auction, their bullish momentum and the significant buying interest from new investors, the EUA prices finally broke above the 40€/t resistance on Thursday morning to hit up to 40.12€/t. Prices however proceeded to slide back in the afternoon, likely on profit taking with the 40€/t speculators’ target now reached, and dropped significantly at the end of the session, eroding nearly 1.10€/t over the last hour of trading. This late fall of prices seems to have been induced once again by a Bloomberg article, stating this time that the European Commission might be considering limiting the speculative trading in the EU ETS as a consequence of the recent rally, mainly attributed to hedge funds and other investors, that brought EUA prices up by nearly 22% in less than a week. The EU entity is indeed concerned by the large and growing influence of financial players over the carbon prices and the high volatility often decorrelated from the fundamentals they have induced over the past year, and considers including a limit on the number of allowances held by speculators in the wide revision of the EU ETS expected next June. Several market participants however question the effectiveness and implementation of such measure.

The power prices posted hefty losses along the curve on Thursday, pressured by the faling underlying prices and late weakness of emissions.