This week’s outlook is bullish as EUAs push to new all time highs above €70, though the market is now heavily overbought, suggesting a short term correction could arrive. The bull run seems to have more substance than appeared at a first look last week. A look at the EU ETS Dec21 futures price chart suggests speculators may be having some influence, possibly buying EUAs as a hedge against inflation. Giving confidence to speculators may be the European Securities and Markets Authority’s opinion that there is no unfair market manipulation happening in the EU ETS. Meanwhile colder weather forecast this week and the continued suspension of the certification process for Nord Stream 2 add fuel to the fire. On the other hand, we are in solidly overbought territory from a technical perspective, so EUA prices should take a dip sooner or later, while high EUA and gas prices could result in further demand destruction. More detail on speculators, weather, the Nord Stream 2 suspension below.

Further price gains seem likely, and buyers are likely to be heavily involved buying any price dips that appear.

YTD Average Price: €50.55 Indicative EUA Price: €71.07

Prices rise in the afternoon – investor hedge against inflation?
EUA prices on Monday and last week tended to trade more heavily in the afternoon, suggestive of influence from American based traders who may be involving themselves in commodities as a hedge against inflation. See the charts below showing investment fund long positions and the hourly EU ETS chart last week, showing added trading volumes in the afternoon. On this basis, if investment is going into EUAs, it’s difficult to see when selling might happen, so EUA prices may remain high.
Industrial performance forecast to slow in Q4: In short term, added interest is naturally bullish, though if inflation hits the Eurozone hard, bearish influence is likely to affect all markets. Raw material shortages and supply chain bottlenecks lead the Ifo Institute to forecast a slowdown in German economic growth for Q4.

• Winter weather and no wind – but impact to be muted? Compounding the bull run is a blast of colder weather expected to hit Scandinavia this week. Low hydro levels, little wind and cold weather make for a recipe for fossil fuel powered electricity. Utilities, however, know the winter is cold and so will have largely covered winter generation, so this shouldn’t mean great volumes of buying demand – and indeed thin traded volumes recently don’t suggest a major increase in fundamental demand.
• Nord Stream 2 suspension – a few weeks delay may not make much difference: Gazprom must transfer ownership to a German subsidiary. This could take a few weeks. The pipeline is unlikely to be online before spring/summer 2022 however, so the delay may not make any material difference.
• European Securities and Markets Authority find no abuse: investors will be encouraged by the ESMA’s finding no anti competitive trading behaviour.
• Covid-19 unlikely to be an issue as in 2020: the world appears to have learnt how to manage with Covid-19. We see little covid risk accounted for in any related markets to the EU ETS and don’t see it being a big factor that could cause price reductions.
• Technical analysis: the Relative Strength Indicator (RSI) now shows an overbought reading – suggesting a short term correction. The market is also pushing to the top of the upper Bollinger Band – very bullish, but also suggestive that buying activity must calm down if traders want to risk manage their speculative positions and not lose money. 7 days of gains with only a couple of minor red candles mean further price gains are likely – the last three days in a row have all seen price increases. €73.22 is the next technical target, while €64.03 is the target on the downside – if we close below that, we should get a real correction.


For more details on market outlook & protecting against your carbon risk, please email or call +31 20 522 0292