This week, with the pull of the Dec22 options contract expiry absent, weakening fundamentals will come up against the end to EUA auctions for the year and renewed confidence in the market following this weekend’s legislative session on the Fit for 55 package. Fit for 55 is likely to have the largest market moving impact in the confidence it should give investors – the actual substance of the deal doesn’t differ materially from the Commission’s proposal in 2021 – therefore we assess it as having a mostly neutral short-term market impact. Given proximity to the end of the year we might see only a muted market response from traders – already we see low volumes changing hands. Meanwhile we’re seeing improved French nuclear generation levels which seem to be displacing some gas fired power generation, improved wind forecasts and milder weather as the cold spell of the last few weeks has broken. From a technical perspective we are seeing hints that further price losses might be possible, but EUA Dec23 futures need to close under technical support at €81.75 however to convince that substantially more losses are on the way.

  • 2.6 million EUAs will be sold at auction this week, the last auction of the year. Auctions resume on 9 January. 
  • Market moving events:
    • German wind is back: wind levels are making Germany a net exporter of energy and have drastically cut the share of lignite, coal and natural gas in the German energy mix as of Monday morning. That should mean a cut to EUA buying interest. bearish
    • French nuclear resurgence: French nuclear energy production is up by about 10GW month on month and looked last week to be displacing some gas fired power plants. bearish
    • Gas price cap & anti-corruption investigations threaten disruption: Qatar says that investigations into corruption could ‘negatively’ impact LNG flows. Efforts to impose a price cap on natural gas are proving controversial and prompting threats from the likes of The Intercontinental Exchange (ICE) to pull TTF Gas futures trading from the EU. This would be destabilising for energy markets. possibly mildly bearish in short term
  • Agreement on Fit for 55: see negotiating positions and the outcomes of the trilogues here. Ambition has been slightly increased, but should not have a very material impact on EUA prices beyond what was already priced into the current EUA price. – neutral
    • Use of auction revenues: member states are now required to spend all national revenues from EUA sales on climate initiatives. They already spend about 80% of those revenues on climate initiatives. Strictly speaking this runs counter to the logic of cap and trade systems and threatens to accelerate the green transition, at the expense of the carbon price which would be undermined by these government funded investments. This could be somewhat bearish for EUAs in long term.
  • Fundamentals: 
    • Gas storage: 84.58%, down from 88.49% on 9 December. With milder weather now forecast, gas storage levels are more likely to stay intact. Gas savings efforts, which had some modest impact, and strong LNG deliveries keep Europe in good shape to last through the winter. Bnetza, the German grid operator, says storage needs to be maintained over 40% full for much of the rest of winter in order to avoid industrial natural gas rationing. As yet provides some stability to Europe through winter – bullish
    • Fuel switching: gas fired power remains less profitable than coal fired power. EUAs would need to reach approximately €380 to make gas fired power cheaper than coal fired power. – bullish/neutral
    • Mid-term weather forecast: expected to be more mild than the seasonal average for Q1 2023 – should help to keep natural gas storage intact, above 40%. bearish
    • Investors: investment funds increased their long positions by almost 3 million EUAs as of 9 December to reach 20.77 million EUAs. Some of this length is likely sold since the EUA options expiry.
  • Technicals: Fibonnaci retracement suggests that we need to go under €81.75 (50% retracement) on the Dec22 for the market to turn convincingly bearish. EUAs fell from €90.41 to last Friday’s low of €83.07, down about 8.11% last week. After four days of price losses,  Momentum (oscillator) remains positive at 17.3, but the RSI is dropping back towards the 50 range after showing overbought signals last week.
  • EUAs are slowly approaching the Moving Averages (44d @ €79.11, 100d @ €77.77 and 200d @ €80.18).
  • We are beginning to see signals of bearish divergence from the EUA price in some technical indicators. Bearish divergence refers to relatively higher real prices, while technical indicators point lower.Comparing August 19’s high of €99.22 with last week’s high of €90.41, the MACD and momentum indicators show bearish divergence in the EUA price (see the lines drawn on chart 4). This recent move in line with the overbought RSI could mean that prices have plateaued, and we are eyeing further declines in EUA prices.

Key Technical Levels:

R3: 94.69

R2: 90.41

R1: 87.50

CP: 84.65

S1: 81.81

S2: 79.97

S3: 77.50

(***CP = Current Price)


Outlook: neutral

  • Indicative EUA Price: €84.60
  • YTD Average EUA Price: €80.98
  • MTD average EUA Price: €87.21



1 – Dec22 EUA price chart 2. French nuclear generation ramp up (in red

See also November generation levels on


3 – German power generation mix

Note decreased share of gas, lignite and coal after 15/12/2022, and resurgent wind generation levels.

Chart 4 – technical indicators

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