A relatively subdued energy complex and political uncertainty should keep EUA trading rangebound this week. Tuesday, Wednesday and Thursday bring trilogues on ETS revision and REPowerEU and a meeting of the European Energy Council. The Energy Council meeting will focus on emergency measures for the gas market, which could prompt modest volatility for EUAs – explained below. The ICE Commitment of Traders report is not showing any significant uptick in speculator long positions as yet –  maybe confirming that the market is in waiting mode. Temperature forecasts or the ‘jumbo trilogue’ session which is intended to produce a preliminary agreement on Fit for 55 for 16-17 December may be the key price signals that the market will now look to. From a technical perspective, EUAs appear to have rejected downside for now, and a breakout could be in the making…

  • 12.5 million EUAs will be sold at auction this week
  • Renewable generation to limit EUA price gains: wind output in Germany is running at normal to just above normal levels, while rain in the Swiss alps will help French hydro generation, which is running at about the five-year historical average at present.
  • French nuclear struggles to come back online to full capacity: a quarter of reactors were meant to come online again by mid-December, but EDF are saying that maintenance is running behind schedule. Bloomberg show that this will keep French nuclear capacity about 5000MW below planned levels through December. The French grid operator RTE is warning that risk of shortfalls of power in January is growing. If it comes to it, industrial energy demand curtailment would naturally feed through to EUAs (bearish).
  • Thursday Energy Council meeting on gas price – only limited market moving potential: our modelling shows that at a €120 price cap, the EU ETS might have seen modest switching from coal back to natural gas had the cap been applied over 2022, though in practice this would have resulted in a rebound to demand for natural gas and no sustained emissions cut. ICIS also model that an increase to UK power import demand given lower power prices in Europe would offset any emissions reductions from a return to fuel switch – and argue that an ‘Iberian style’ price cap on natural gas looks unlikely to gain sufficent political traction.
  • Gas storage and gas flows: much of the downside risk comes from potentially drawing down gas reserves by end of winter, requiring industrial demand cuts to keep domestic heating on;
    • gas storage now stands at 95% full. Net withdrawals have begun from Dutch storage sites last week, with smaller withdrawals from Germany natural gas reserves, but no withdrawals of significance in France.
    • Germany is planning for five LNG terminals by end-2023, the first of which was completed in Wilhelmshaven last week, while gas pipeline flows have continued for the most part.
    • TTF Gas prices have been volatile recently, trading between €124.10 and €97.85 / MWh over the last two weeks, but are significantly down from earlier highs.
  • Clean brown, clean dark spreads widen: coal fired power remained in the drivers’ seat and looks likely to continue to do so. See chart 4.
  • Technicals: last week we saw the EUA price bounce for a second time off the 44-day MA, suggesting that it has rejected the bearish momentum. The uptrend channel (see picture 1) remains unbroken, suggesting prices could go higher, while Monday’s trading completes the formation of a morning star candlestick formation – typically a strong indicator of a reversal in trading. Finally, we note a pennant formation which seems to be building on decreasing volatility. Any break of the pennant on the upside or the downside could determine the long-term EUA price trend.

Key Technical Levels:

R3: 78.50

R2: 75.10

R1: 73.83

CP: 73.20

S1: 71.50

S2: 70.50

S3: 69.50

(***CP = Current Price)


Outlook: EUAs to trade rangebound between 73.20 and 78.50

  • Indicative EUA Price: €74.90
  • YTD Average EUA Price: €80.75
  • MTD average EUA Price: €74.02



1 – Dec22 EUA price chart 2 – Fuel switch with natural gas price cap applied to 2022 – where fuel switch prices drop under the green line, fuel switching should in theory be possible.


3 – ICE Commitment of Traders – Fund holdings 4 – Clean Generation Spreads – ICIS: energy sector EUA demand remains strong as coal and lignite remain in the drivers seat

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