This week we have a neutral outlook, but warn of continued downside risk as EU leaders seem to be taking an increasingly hawkish stance on Russian gas. Last Thursday saw volatility for EUAs as the deadline after which payments for natural gas deliveries must be issued in rubles passed. Gas buyers in the EU can pay by having Gazprombank convert US dollar or Euro payments into rubles. With that issue resolved in theory for now at least, EUAs look set to continue trading between €76.75 and €82.00 with high energy sector EUA demand on one hand, and the stress of the war on energy prices on the other. Milder weather than last week and more wind could cut some demand for EUAs, there will be a vote on Tuesday in the European Parliament on the MSR, and fear in the gas market, with storage levels still low, could mean volatility for EUAs. EU leaders, however, remain insistent that existing gas supply contracts be respected in their stipulations for euro or dollar payments. Commentators are suggesting disruption to gas supplies could lead to a recession. With gas payments due around 15-20 April and the EU readying to discuss bans on Russian gas, we may see some more volatility in the market in coming weeks.

  • Gazprombank facilitates ruble natural gas payments: since Gazprombank can convert euros and dollars to rubles, gas flows can continue. All gas buyers are forced to open two accounts with Gazprombank – one in the original currency, and one in rubles.
  • EU leaders state unwillingness to agree to Russia’s gas payment terms: Germany’s Chancellor Scholz last Thursday said payments for natural gas will continue to be made in Euros. Baltic states have halted gas imports from Russia and are relying on reserves in Latvia. Slovakia, a country highly reliant on Russian gas, looks torn, with the economy minister saying Slovakia could not be cut off from Russian gas flows, but the prime minister urging solidarity with the European Union’s stance. Payments for gas deliveries due in rubles should be due around 15-20 April, so we may see some market reaction around then.
  • How long could Putin cut off the gas? Russia needs the money from natural gas purchases – so it is questionable how long they could hold out with their rouble payment demands.
  • Emissions remain high – coal remains a key energy source: comments from German Vice Chancellor Habeck, who is covering Climate Action – “if gas not available, we will need to fall back on coal” – there are two possible takeaways on this – one, that coal fire is likely to remain a key energy source and source of demand for EUAs, but also two – that gas could be on the table for future sanctions. Deutsche Bank’s CEO Christian Sewing warns disruption to oil, gas risks sending Germany into recession.
  • Milder weather and more wind to reduce EUA demand: milder weather after last week’s cold snap should bring some relief to the market, as well as more renewable power generation – see German generation levels in chart 2 below.
  • EU ETS emissions up 9% in 2021, according to preliminary data: Refinitiv analysts argue that coal increased its share in the European power mix from 13% to 16% in 2021, pushing wind generation to a lower share of generation. While the emissions data is in line with what many market participants had expected, evidently resulting in little market reaction, it looks likely that emissions from coal fired plants will remain high through 2022 – with, as we believe, fuel switching ruled out through 2023.
  • MSR withdrawal rate to be voted on at European Parliament tomorrow (Tuesday): this could cause volatility. MEPs are proposing extending the MSR at 24% until end 2030.

Outlook: neutral

  • Indicative EUA Price: €78.00
  • YTD Average EUA Price: €83.08
  • Month to date average EUA Price: €78.49
  • March average EUA price: €75.03


1 – Dec22 EUA price chart 2 – German power generation sources – Monday 4/4/22


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