The week ahead brings the continued suspension of EUA auctions, likely low liquidity trading, and mild, windy weather – though against a backdrop of continued market tightness. These conditions saw EUAs drop in price last week. Weak power and gas prices could keep EUAs subdued, but with no new EUA supply coming via auction this week and low liquidity, further short-term downside may be limited. A revision of forecasts for colder weather would mean some bullish potential returns to the market. We expect rangebound trading this week, but of a choppy, volatile nature given lack of liquidity – next week may be more interesting as auctions resume and liquidity starts to return to the market.

Looking further into the future, a few factors look set to determine price movements in coming weeks:

  • French nuclear generation looking more reliable: French nuclear is down 23% Jan 23 vs. Jan 22, but in spite of recent shut downs to conserve fuel, the market may have more confidence in French nuclear being available than it did in November – playing into last week’s price losses.
  • Europe seems to be managing the energy crisis well so far, with gas storage standing at 82.95%, up from 82.42% on 23 December as of Friday and gas prices roughly where they stood at 1 January 2022. That should be supportive for EUA prices as it suggests large scale industrial shutdowns won’t be required. Bullish to neutral
  • The return to auctioning on 9 January could be a source of some price weakness. Bearish
  • Weather forecasts remain for mild temperatures, having sent gas demand to seasonal record lows. Bearish
  • The REPowerEU and Fit for 55 packages – should already be priced in but the cumulative effect of the additional REPowerEU EUA sales could be moderately bearish in practice. Expect ratification of Fit for 55 by European Council in Q1. Neutral
  • Recession remains a risk – in spite of Europe weathering the energy crisis well so far. The European Economic Commissioner Paolo Gentiloni stated in November that the economic situation has deteriorated markedly, and we are heading into two quarters of contraction. Chinese growth is lagging and represents a risk to global markets, warns the IMF – IMF Managing Director Kristalina Georgieva – “[2023 will be] tougher than the year we leave behind… because the three big economies – US, EU and China, are all slowing down simultaneously”. Bearish


Outlook: neutral

  • Indicative EUA Price: €84.00
  • 2022 Average EUA Price: €81.21
  • December average EUA Price: €87.32



1 – Dec23 EUA price chart


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