This week EUAs should remain supported on August’s continued halved auction volumes for another 8 working days but with a bearish engulfing chart pattern to start the week, last week’s bullish momentum seems to have disappeared. Bears may take control heading into September’s return to full auction volumes. Fundamentals have not changed much since July, evidently meaning a bull run in August on halved auction volumes, but from September potentially a correction back to July’s levels. Furthermore, risk of a long term economic downturn could also turn the outlook for EUAs to bearish. Below we highlight what bullish and bearish factors likely are underpinning EUA price developments at present, including a return to full auction volumes from Thursday 1 September, data showing reductions in industrial gas demand, more data showing that the 15% gas demand reduction target is proving difficult to achieve (with implications for winter gas use) and the REPower EU proposals.


We might also see a case of prices dropping into the resumption of full auctions, then rebounding as shorts accumulate over the remainder of August. Target price levels are indicated below.

  • 4.421 million EUAs will be sold this week at auction, compared to a weekly average of 10.1 million EUAs to be sold in September.
  • Return to full volumes of auctioning next week: auctions return to full size from Thursday next week. Short sellers may start readying themselves for a correction in anticipation of a return to more ‘normal’ trading.
  • Coal burn remains strong, emissions remain high, EUAs could increase in price: coal and lignite power generation profitability continues to outstrip gas power generation profits – see chart 2. Utilities will still be happy to buy at these levels as clean dark spreads sit at 300 euros, outstripping EUA costs even at the €99.22 all time high.
  • Nord Stream maintenance – 31 August – 2 September: the outage looks set to cut volumes entering Europe from Russia by 35 million cubic metres per day. Traders will be fearful that the gas supplies won’t return after maintenance. Typically a high gas price should prompt lower EUA prices but the shortage of EUA supply might mean that the coal fired power plants are buying most newly auctioned EUAs anyway.
  • High prices hit industrial natural gas demand: ICIS show that natural gas demand is dropping across Europe, but with CCGT power generation still running strong it must be heavy industry that are cutting demand. Reduced industrial output would be bearish for EUAs. See chart 3.
  • Gas storage filling up: German gas storage is now over 70% full. Strong gas storage should provide support to EUAs as this would imply some stability for energy markets.
  • Gas savings plan working behind schedule: yet current gas consumption is running at 60 million cubic metres less per day – that’s about 8.5% down on average – not 15%. While in a broad sense the cuts to gas use should imply less EUA demand, it also suggests that this might not be enough to get Europe through winter – Bloomberg estimate gas storage levels will be running low if Russian gas flows continue at present levels, or even worse if there is a full cut-off. That could ultimately mean more turbulence for EUAs
  • Recession risk: the poor economic outlook amidst the energy crisis has central banks warning of recession.
  • REPower EU remains on the table: though not a very popular proposition with some in the European Parliament, the idea of selling 250 million EUAs to raise money to move off Russian gas has not yet been dismissed. Nor has the potential cut-off to speculators from the market, though this looks a difficult proposition given many utilities are speculators.
  • Support & Resistance levels: EUAs have gained 28.03% since hitting support at 75.50 on 25 July, hitting a new all time high price of €99.22. The surge higher has us approaching something looking like a double top formation when viewing the weekly chart – typically a bearish indicator. Compounding this, we look set to close on Monday with a bearish engulfing candlestick pattern – another strong indicator that further price losses may be on the way. Failure to retake the all time high at €99.22 Euros could prompt a loss of confidence in the bullish narrative for the market. The 200day-MA is at €82.54, the 100day-MA at €84.20, and the 44day-MA (2 month) at €84.89. These could prove strong support levels to the downside.
R2: 99.22
R1: 98.50
S1: 96.42
S2: 92.38
S3: 88.34

Auction timetable:

Week 34 Week 35 Week 36 Week 37 Week 38 Week 39
# EUAs 4,421,500 8,148,500 7,482,500 12,494,500 10,323,000 12,494,500

Outlook: bearish, though remaining low August EUA supply could limit losses for now.


  • Indicative EUA Price: €91.90

  • YTD Average EUA Price: €83.63

  • MTD average EUA Price: €87.84



1 – Dec22 EUA price chart 2 – Clean Generation Spreads
3 – Natural gas demand



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