The outlook for the UK ETS this week is neutral. ICE Commitment of Traders data shows speculator interest has dropped off, but gas generation is making up the majority of UK power generation amidst cool temperatures, so though since Friday UKAs have posted a couple of red candles, buying demand does seem to remain to limit price losses. There is a UKA auction this Wednesday. Any weakness in EUAs following the Wednesday EUA options expiry could have a bearish influence on the UKA price. A high pressure area over Scandinavia looks like bringing sunny weather to Northern Europe, though with calm conditions – as noticeable from a snapshot of UK power generation at 1pm on Monday (see chart 2), there isn’t a lot of UK solar generation to switch on – so gas fired power remains the key source of electricity, and therefore, UKA demand.
UK ETS Outlook: bearish-neutral
Indicative UKA price: £78.50
YTD average UKA price: £79.07
MTD average UKA price: £74.85
|1. UKA Dec22 Price Chart||2. Snapshot of UK energy generation 7/3||3. ICE Commitment of Traders – Investment Fund long positions 11/03/22|