This week we expect a further increase to the EUA price but could see volatility after Wednesday. The one hour and daily charts are starting to form a wedge pattern, which has preceded breakouts before. Dec22 Options expire this week – with 10922 call options (x1000 EUAs per option) sitting at €90, it looks like there is a good chance the EUA price will be sucked towards €90. The looming absence of auctions from the 19th until 9 January should also keep EUA prices supported. Current high EUA prices look prompted by temporary circumstances however – lack of wind, sun, nuclear, a pause to auctions this month, and the options expiry – and a correction should eventually happen. Though cold is likely to persist, more wind in the North Sea is forecast from Wednesday – along with the options expiry on the 14th (Wednesday), we could see more volatility, though fundamental market tightness remains. Ending the week, legislative sessions on CBAM, REPowerEU and finally the ‘jumbo trilogue’ on EU ETS reform under Fit for 55 are scheduled and could prompt volatility, which is discussed below. The target to the upside this week is €89.50 to €90.36 – around the key €90 euro options level.

  • 9.4 million EUAs will be sold at auction this week, 3.1 million less than last week. 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
    • Wind returns by end of the week? North Sea wind is expected to increase by Wednesday. Next week could bring much windier weather. This could send a bearish signal to the EU ETS.
    • Options expiry 14/12/2022: we’ve previously seen EUAs drawn towards key levels at which traders are holding 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.
  • Legislative sessions: – see positions of each EU Institution here. Also note some reforms to the aviation sector’s participation in the ETS have been agreed – follow the link to our summary of EU legislative positions for more information.
    • 12 December – CBAM: the sectors and emissions that the Carbon Border Adjustment Mechanism will cover are up for debate, as well as the phase-in. There is not much news on CBAM that could give some idea of whether this could affect EUA prices in bullish or bearish fashion this week.
    • 13 December – REPowerEU: short term bearish potential as the market assesses news about selling additional EUAs.
    • 16-17 December – Fit for 55 EU ETS Reform ‘Jumbo Trilogue’ – meant to produce full agreement on package: still up for debate are MSR thresholds, adjustments to the cap on emissions, CBAM phase-in, free allocation benchmarks and ETS 2, which would cover buildings and transportation.
      • MSR – if discussions tend toward the Parliament position this would send a bullish message to the market
      • ETS 2 – potentially politically sensitive, failure to find agreement could create uncertainty on the entire package and be bearish for EUAs.
  • TTF Gas price cap triggers: If prices exceed €220/MWh, sustained for five days, AND if TTF price premium exceeds €35 more than LNG for a period of five days, orders for front month TTF derivatives over €220/MWh would not be accepted.
  • Fundamentals: 
    • Gas storage: 89.02%, down from 92.03% on 2 December.
    • French nuclear, German wind both running below average: the outlook for French nuclear looks poor, while German wind forecasts were revised downwards by about 17% or 1.9GW.
    • Fuel switching: gas fired power remains less profitable than coal fired power. EUAs would need to reach approximately €365 to make gas fired power cheaper than coal fired power. – bullish/neutral
    • 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. The Relative Strength Index no longer shows an overbought reading after it had last week. A breakout looks possible as volatility drops and the market prints higher daily lows with each day, creating a rising wedge pattern on the chart (see Chart 1, below). We are trading one standard deviation from the 200 day moving average and looking for trading around €90 to €91 to complete the wedge pattern. Any break above the rising wedge may provide the price of the EUA additional support and allow it to rise to €94-95 levels, while a break to the downside is likely to be sharp and bring the price down to the year-to-date average of €79-81 levels.

Key Technical Levels:

R3: 94.40

R2: 90.36

R1: 89.50

CP: 89.30

S1: 86.80

S2: 83.80

S3: 79.74

(***CP = Current Price)


Outlook: neutral to bullish

  • Indicative EUA Price: €89.805
  • YTD Average EUA Price: €80.86
  • MTD average EUA Price: €87.50



1 – Dec22 EUA price chart 2. Technical analysis: Fibonnaci levels


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