UKAs are looking similarly bullish on similar fundamentals, with cold weather and little wind, as well as no UKA auction this week. Monday has seen only a moderate price gain on very low volume – speculators have less easy routes to market than in the EU ETS – but if the price difference to EUAs is small, by the time the next UKA auction comes, utilities swapping EUAs to UKAs are likely to find doing that swap attractive – so UKAs will stay in demand.

  • The price difference from UKA to EUA is now only 67c – no auction this week, but if EUAs remain at record high prices, utilities swapping EUA to UKA should buy the entire auction.
  • Lack of wind and colder weather will keep UKAs supported. Some sunny weather on Monday may be helping to limit gains from energy sector buying.
  • UKAs continue to trade above the cost containment reserve threshold for December, which is £52.88. The month to date Dec21 futures closing price is £56.39.
  • The market seems not to be pricing in any correction due to UK government intervention next month. Either they don’t think the government will intervene, or the demand is coming from utilities selling EUAs and buying UKAs – who may care more about the price difference between the two rather than the absolute UKA price.
    Indicative Price offered: £65.50


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