Previous Week Events:

On Friday, the benchmark contract for EUAs settled at 66.50 EUR, marking a 0.5% increase for the day, but a weekly decline of 5.4%. This represents the largest weekly drop in six months, driven by a significant reduction in fossil-fuel electricity generation across the EU.

For this week, there is a possibility that the market follows a sideways to bearish trajectory, as recession fears are adding to expectations for a lower demand for emissions in the future Additionally, news of an ongoing gas supply from Russia also supports this outlook. However, as we are approaching the compliance deadline on the 30th of September, we might see an increase of the buying interest from operators which still need to fulfil their 2023 emission obligations.

Auction volume: 14.6 million EUAs , 2.8 million more than last week

Energy Fundamentals

• Gas storage sits at 92.9% full on September 7th, compared to 92.4% on August 31st, 2024.
• German industrial output falls more than expected in July, adding to recession fears.
• EU manufacturing PMI also registered a strong decline in July, fuelled by data from Germany and France.
• Russia raises its 2024 forecast for oil and gas revenues by $17.4 bln.
• China’s LNG imports may suffer from full inventories and lower demand.
• Italy is looking to set-up its own nuclear power company and kick-start production.
• Russia is willing to maintain gas transit to the EU through Ukraine - or alternative pipelines - even after 2024.
• Romania, Hungary, Georgia and Azerbaijan agreed to install a power line under the Black Sea, to bring renewable energy from the Caucasus into the EU.
• Oil prices slightly recovered after a major sell-off last week.

Investment Funds

• The net short speculative position held by investment funds increased to -6.69m EUAs on August 30th (vs. -4.79m EUAs on August 23rd).
• Gross short positions increased to -47.03m EUAs (vs. -46.4m EUAs).
• Gross long positions decreased to 40.35m EUAs (vs. 41.6m EUAs).

Market Prices:

• Indicative Dec24 EUA Price: €66.96
• Indicative Spot EUA Price: €66.25
• YTD Dec24 EUA Price: €66.76
• MTD Dec24 EUA Price: €67.66

Chart A: December 2024 EUA Price (EUR)

Technical Analysis

From a technical perspective, EUAs are currently trading in a downward channel on the daily chart. There is some potential for a movement towards the 61.8% Fibonacci level at 68.24 EUR, supported by the middle of the Bollinger Bands, the 20, 50 and 100 Moving Averages all trading above the current price, and the MACD and Stochastics both in oversold territory. However, if the upward movement loses momentum, a close below the 76.4% Fibonacci level at 66.721 EUR might keep the price on the lower end of the downward channel, with 64.265 EUR as the next significant support level.

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

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