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AFS Energy EU ETS Report Week 16

Week 16 carbon news update

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Author
Valentina Stekovic
Publication Date
April 15, 2024

EUAs recorded an 18% increase over the last week, with Thursday marking the largest daily gain in 19 months. This bullish momentum was driven by aggressive short covering, coupled with the latest geopolitical developments.

Auction volume: 11.4 million EUAs, 2.3 million less than last week.

Looking ahead, short covering appears to have slowed down, while energy fundamentals remain relatively weak. Nevertheless, given the current uncertain geopolitical landscape, energy markets are poised for significant volatility, potentially leading to short-term price spikes. Our outlook suggests that the evolution of the geopolitical situation in the Middle East will serve as the primary catalyst for EUA price movements for this week.

As of April 4, gas storage stands at 60.61% capacity, marking an increase from 55.99% recorded in 2023. Anticipated colder-than-normal temperatures throughout Europe over the next fortnight are poised to escalate energy demand. Tensions in the Middle East are set to amplify volatility in energy prices. Following drone attacks, the Zaporizhzhia nuclear plant underwent a cold shutdown. Notably, a significant tightening occurred last week, with Wednesday witnessing a potential reduction in net short positions in the Commitments of Traders (CoT) report. Meanwhile, Balkan nations are turning their attention towards hydrogen as part of a concerted effort to mitigate emissions.

DEC24 chart development

Technical Analysis

Last week, prices breached the upper boundary of the ascending channel, indicating that the new support level for a price return to the 65 range would be around 69.96. If this level is breached, a temporary return to the 65 range could be anticipated. However, if the price fails to close within the channel again, we might witness a price surge. This week, technical analysis following this morning's decline hints at a potential reversal in direction (bearish movement). However, current market dynamics are primarily influenced by fundamental news driven by geopolitics rather than technical indicators.

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