The outlook for the UK ETS this week is neutral to bearish. Mild weather should reduce energy demand though there is relatively little renewable generation with wind levels low, so carbon intensive electricity will continue to add some demand. The UKA auction on Wednesday could see some convergence with the EUA price, which sits at approximately £66, if utilities are still swapping a backlog of EUAs to UKAs. The geopolitical situation relating to natural gas deliveries and payments to Russia could cause industrial shutdowns and stress on commodities positions, while some commentators are predicting recession as supply chains struggle under the weight of sanctions on Russia and Chinese covid outbreaks, so there is growing downside potential. Nonetheless, as the UK ETS secondary market remains illiquid and fortnightly auctions well subscribed, the market is in effect short, and last minute compliance buyers may limit any price losses.

UK ETS Outlook: neutral to bearish

Indicative UKA price: £75.00

YTD average UKA price: £78.42

MTD average UKA price: £76.02

 

1. UKA Dec22 Price Chart 2. Snapshot of UK energy generation 19/4
from grid.iamkate.com

 

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