Last week’s bull run came on the back of weak German renewables and cold weather, meaning lots of coal fired power generation causing high EUA demand. Against a backdrop of a tight market and strong power demand, this sent EUAs higher. The week ahead brings more cold, but slightly improved wind levels. Next week forecasts are for reduced wind once again. EUA auctions end on the 19th of December and won’t resume until 9 January, which should be supportive for carbon prices. Dec22 EUA options expire on 14 December and could exert a pull on EUA prices towards key levels. Therefore the same bullish fundamentals remain largely in place and should keep the market in price discovery mode, above €80 per EUA. A few factors could prompt volatility this week however: EDF says it sold 1.5GW too much electricity for today – unwinding hedges for that electricity could cause volatility; the price cap on Russian crude oil could have ramifications for mid-term industrial productivity in Europe if imports are disrupted, and if gas and power prices increase again this could impact power demand.  There are no significant legislative discussions this week – the market should look to talks on CBAM on 12 December and the ‘jumbo’ trilogue on Fit for 55 on the 16/17th for more clues on market direction. We could be in for some consolidation this week, so we take a bullish to neutral view.

  • 12.5 million EUAs will be sold at auction this week, 3.1 million more than last week – but EUA auctions end on 19 December and do not resume until 9 January. Last time EUA supply was curtailed in August, EUAs hit an all time high at 99.22. 
  • Market moving events:
    • Cold weather persists, but is it enough to drag EUAs to new highs? Buying demand should remain for EUAs. If colder weather becomes normal we might find EUAs struggle to move materially higher as the market looks for new directional signals – bullish to neutral
    • Options expiry 14/12/2022: we’ve seen EUAs drawn towards key levels at which traders are holding call options – we could see the same happen again. About 10,000 call options (10,000 x 1000 EUA) are held at an €80 strike price, 5000 at €85 and almost 12000 at a €95 strike price, so we could see the market drawn to these levels over coming weeks.
    • Security of gas supply remains a topic. Power demand could drop if natural gas and power prices start to increase. – potentially bearish
      • Russia had threatened to cut off gas flowing to Ukraine as they’d accused Moldova of siphoning off some off the gas. Moldova has paid for deliveries and flows continue. Neutral
      • Stormy weather could disrupt LNG deliveries. Germany has just opened a new LNG terminal in Wilhelmshaven which may struggle to receive gas deliveries due to rough weather. Bearish
      • Geopolitical developments, and uncertainty about energy flows from Russia will continue to represent bearish risk.
    • Political developments look likely to wait until 12 December (CBAM discussions) and 16/17 December (‘Jumbo’ Trilogue to reach agreement on Fit for 55 package).
  • Fundamentals: 
    • Gas storage: 92.03%, down from 93.55% on 25 November.
    • Fuel switching: gas fired power remains less profitable than coal fired power. EUAs would need to reach approximately €365 to allow for fuel switch from coal to gas. – bullish
    • No EUA auctions 19 December 2022 – 9 January 2023 – bullish
    • Risk of power outages in France: with low nuclear availability France could be facing blackouts over the next few months, the regulator RTE warns. In this case, factories might face shutdowns and EUA demand would drop – bearish
    • Investors: investment funds increased their long positions by almost 3 million EUAs between 18 and 25 November.
  • Technicals: since the 21st of November the market has rallied almost 23.8%, showing no signs of a retracement yet. With the 200-day MA at €79.39, the 100-day at €76.87, and the 44-day MA at €74.6, we are about one standard deviation away from those moving averages, which means that a correction could be on the cards.
    • MACD is looking very bullish, the RSI on the daily chart shows the market is overbought – primed for a consolidation perhaps – but we are trending higher. -, while we still have very positive momentum. This could lead to a continuation of the rally this week and next.
    • A break above €88 suggests prices would give way to the €90 level. A break below €84.50 would suggest the bears take control, sending EUAs back towards the next support at €82.50. The uptrend channel has not been broken to the downside, suggesting that any break above €90 shows very strong upside momentum, while €85.40 remains the daily support.The outlook remains bullish from a technical perspective, so buyers may target dips.

Key Technical Levels:

R3: 92.50

R2: 90.00

R1: 88.00

CP: 86.50

S1: 84.50

S2: 82.50

S3: 79.50

(***CP = Current Price)


Outlook: neutral to bullish

  • Indicative EUA Price: €86.60
  • YTD Average EUA Price: €80.72
  • MTD average EUA Price: €86.45



1 – Dec22 EUA price chart 2 – Clean Generation Spreads – ICIS: energy sector EUA demand remains strong as coal and lignite remain in the drivers seat


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