Mild temperatures, forecasts that suggest above average temperatures this winter, efforts to curb gas demand and a fundamentally tight market should prove supportive for EUA prices early this week. Any breakout to the upside might be limited by relatively low power and heating demand, given relatively mild temperatures. A colder period of weather forecast for the end of the week could prompt some short term volatility and could send EUAs higher, unless industrial demand destruction starts to look a threat again. We anticipate EUAs to find support above €73.83, the nearest level of technical support, with a close below that level or above €75.85 setting the direction for the market. Also discussed in this report: REPower EU trilogues & market impact, European Parliament weakens its demand for restrictions on non-compliance buyer market access, and next key dates and elements of the Fit for 55 and REPowerEU trilogues that have potential to move the market.

  • 9.4 million EUAs will be sold at auction this week, and a further 600 thousand EUAAs will be auctioned. 
  • Last week’s price dip: weakening energy markets across the board seem to have prompted the price dip for EUAs. Some profit taking from those who had held EUAs since ~€65 might also have played into the drop in price. We expect fundamental tightness and relative stability for now from the energy crisis to retake control of price developments this week.
  • Mild weather to give way to cold weather – a test of EUA price resilience? See chart 2 – mild temperatures are persisting and helping demand reduction efforts, while long range forecasts from the EU Copernicus Climate Change Service indicate a mild-winter looks reasonably likely. A cold snap is forecast for the end of the week through to early next week, which could be a test of Europe’s resilience and a small hint at how gas reserves might last by end-winter if cold weather were to persist. Fear of large scale industrial shutdowns due to low gas reserves would be bearish for EUAs, but a short cold spell might not overly trouble the market given gas reserves stand above 94%.
  • REPower EU trilogues to begin on 16 November (Wednesday): any debates that could be bullish or bearish for EUAs are likely to be centred on where the additional supply of EUAs to be sold is to come from. It won’t be the MSR, so the most bearish option is off the table, but the use of innovation fund auctions vs. bringing normal auctions forward by a few years looks like a sticking point between the Parliament and Council. Overall, the short term impact is likely to be somewhat bearish, while the MSR will then act on additional supply of EUAs and have a bullish long term impact.
  • Fit for 55 third trilogue concluded last week; two key results, but little price impact: 
    • Market access provision dropped: EUAs saw a small spike last week when the European Parliament reportedly dropped the proposal to limit market access to compliance entities. The market already viewed this with scepticism that the proposal would pass the legislative process so while non-compliance buyers might feel more confidence about buying EUAs, we aren’t seeing much additional bullish impact.
    • Article 29a on price spikes strengthened: currently prices must hit 3x the rolling market average price of the previous two years – and is quite vague on what steps should then be taken to soothe the market. Under Fit for 55, if prices hit 2.4x the average EUA price over the preceding two years, 75 million allowances will be released in the market. – a relatively bearish development.
  • Fit for 55 trilogues to be concluded in December? A ‘jumbo trilogue’ session is to be held on 16/17 December with the aim of reaching a provisional agreement. That still means final agreement is likely pushed to Q1 2023 due to holidays.
    • Two key elements are still up for debate and are seeing no agreement as yet:
      • the thresholds for the MSR (currently if the cumulative surplus in the market, or ‘TNAC’ is over 833 million EUAs, the MSR withdraws 24% of that TNAC volume; if under 400 million EUAs, the MSR adds 100 million EUAs back into the market.). See more details on the positions of the EU institutions here.
      • Maritime inclusion: see negotiating positions here, the Parliament’s position is more bullish than the Council’s.
  • Technicals: last week the price hit the 44-day MA and bounced off, suggesting no great appetite to go materially higher. A break of €75.85 will take prices to higher levels, with 78.50 the next resistance level of note. A break of €73.83 will send the prices to lower levels. RSI gives a neutral reading around the middle 50 mark, while MACD is starting to look slightly bearish. 

Key Technical Levels:

R3: 86.89

R2: 82.50

R1: 78.50

CP: 75.10

S1: 73.83

S2: 70.50

S3: 66.12

(***CP = Current Price)


Outlook: neutral to bullish

  • Indicative EUA Price: €75.10
  • YTD Average EUA Price: €80.90
  • MTD average EUA Price: €75.69



1 – Dec22 EUA price chart 2 – Natural gas demand 


3 – Current temperatures – variation from average 4 – Clean Generation Spreads – ICIS: energy sector EUA demand remains strong as coal and lignite remain in the drivers seat

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