EUAs posted a second consecutive weekly loss, registering a 0.2% decrease on Friday and a 4.2% decline for the week. A decline in natural gas prices and record uptake of renewables contributed to the strengthening of this downtrend.

Looking ahead, EUAs might continue their downward trajectory in correlation with Dutch TTF, which is expected to decline due to the partial restart of the US Freeport LNG plant. This, combined with record renewable uptake, creates a bearish scenario for EUAs. However, extreme heat and potential EU grid issues could lead to increased volatility. Nevertheless, there is a possible scenario where EUAs continue on a bearish trend for this week.

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Auction volume: 11.1 million EUAs, 2.3 million less than last week.

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Energy Fundamentals:

• Gas Storage: As of July 20, gas storage is at 82.5% full compared to 82.8% on July 20, 2023.

• Weather Impact: European power grids face stress from a week-long 40°C heatwave, with extreme weather warnings in place for much of southern Europe.

• Gas Market: European gas is trading lower today as Freeport LNG restarts.

• Market Forecasts: Analysts slightly lift EU carbon price forecasts for H2 2024 but expect enduring bearish factors to continue pressuring the market.

• Renewable Energy: The IEA published a report stating that EU wind and solar output could surpass fossil fuel generation for 2024.

• Trade Policies: The EU is considering imposing tariffs on Chinese biodiesel imports.

• Oil Market: Oil prices rise as Joe Biden quits the US presidential race and wildfires threaten Canadian oil wells.

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Investment Funds:

• Speculative Positions: The net short speculative position held by investment funds decreased to -18.11 million EUAs on July 12th (vs. -17.49 million EUAs on July 5th).

• Gross Positions: Gross short positions decreased to -54.61 million EUAs (vs. -54.75 million EUAs), while gross long positions decreased to 36.49 million EUAs (vs. 37.26 million EUAs).

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Market Prices:

• Indicative Dec24 EUA Price: €65.62

• Indicative Spot EUA Price: € 54.50

• YTD Dec24 EUA Price: €65.99

• MTD Dec24 EUA Price: €68.53

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Chart A: December 2024 EUA Price (EUR)

Technical Analysis

Technically, the price continues to move within a downtrend channel, suggesting potential for further declines. Last week, the price broke through the 100-day moving average, a significant support level, turning it into a strong resistance. The next key support to watch is the lower Bollinger Band, currently at 65.06 EUR. Additionally, 65 EUR is a critical psychological support level. If this level is breached, the price could potentially fall to 62 EUR.

Chart B: December 2024 EUA Price (EUR) - Technical

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