Last week the EU’s emergency plans in case of a full cut-off to Russian gas supplies sent EUAs crashing through trend support around the €83 level, down to support at €77.80 . EUAs look set for consolidation around the €78 level this week – the same prices as we saw in March. On one hand threats to industrial production coming from plans to conserve natural gas supplies, maintenance on pipelines supplying the EU with gas (the TransMed pipeline from Algeria to Italy is partially down for maintenance until 27 July) and potentially more EUA supply through REPower EU all provide bearish risk. This is compared to already high emissions, the use of more carbon intensive fuels to conserve natural gas supplies, and August’s half auction volumes, which should have a bullish influence on the EUA price. Given high emissions and the low auction volumes in August, we could see buyers drive EUAs higher as we near the end of the month.


Update 26/07/2022: further maintenance on Nord Stream has been announced from Wednesday. This could have a bearish impact on EUA prices given that Europe will have to scale back its gas consumption to ensure sufficient storage for winter. The first target for cuts to gas consumption will be heavy industry. With that said, some will switch to more polluting fuels while more coal will be used for power generation. This should have a bullish impact, as well as August’s half auction volumes described below.

  • 12 million EUAs will be sold this week at auction, 0.5 million more than last week. This is the last week of full auction volumes before August’s half volumes kick in. EUA prices typically rise in August – every year except for in 2019.
  • Coal burn remains strong, emissions remain high. Coal and lignite power generation profitability continues to outstrip gas power generation profits – see chart 2. Analysts at the consulting firm CRU are saying that the EU’s efforts to conserve gas are leading to the use of more carbon intensive fuels, which they say adds 2% more EUA demand. This could ultimately mean a full recovery for EUA prices back to the 85-90 euro range, according to CRU.
  • Bearish potential – winter readiness plan set for discussion at European Energy Ministers Council on Tuesday: the topic has proven somewhat politically sensitive with some countries arguing they should not have to take on more burden when they are not reliant on Russian natural gas supplies. Agreement on a plan could raise questions about long term industrial output and therefore emissions, though efforts to conserve gas inevitably lead to burning more carbon intensive fuels.
  • Bearish: TransMed pipeline capacity temporarily reduced: given the continued negative correlation between natural gas prices and EUAs, the break through trend support may now be exacerbated by maintenance on the TransMed pipeline from Algeria to Italy, which is reducing volumes of natural gas sent to Italy, adding upside risk to natural gas prices and potentially further price losses for EUAs. The maintenance is due to last from 20 July to 27 July.
  • Recession fears grow for Germany: the IFO research institute has German business confidence at two year lows, due to the energy crisis and pessimism about continued natural gas flows – feeding into the current price drop. Meanwhile political turmoil in Italy
  • European Parliament in recess until 22 August – REPower EU, Fit for 55 discussion on hold until September: though the possible sale of 250 million EUAs will hang over the market, discussions on this are likely to resume in September.
  • Support & Resistance levels: EUAs saw a 11.02% drop last week, back to March 2022 levels. On the daily chart the Relative Strength Indicator is below 50, while on the hourly chart is around 32 – indicating in short term the move lower may run out of steam. The 100day-MA is at 82.10, while the 200day-MA is at 79.85, which provided resistance when EUAs tried to recover on Thursday and Friday. 

    Bold Support Levels:
    S1 – €76
    S2 – €75.15
    S3 – €73.31
    Bold Resistance Levels:
    R1 – €77.90
    R2 – €79
    R3 – €81.34

Outlook: neutral – bullish risk grows as we near August.

  • Indicative EUA Price: €77.70

  • YTD Average EUA Price: €83.41

  • MTD average EUA Price: €83.12


1 – Dec22 EUA price chart 2 – Clean Spreads – ICIS data


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