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The Dec 24 contract settled flat last week, marking a marginal decrease of 0.1%. On Friday, the benchmark contract reached its four-month high at 75.50, rapidly declining afterwards. Similar to the week before, this movement can largely be attributed to profit-taking before the weekend.
Auction volume: 12 million EUAs, 3.5 million more than last week.
Looking at the current market fundamentals, a possible outcome for this week could be that EUAs continue trading in a sideways to bearish pattern, with a warm weather forecast and no major news on the horizon that could drive prices upwards. Furthermore, as investment funds’ net short position declined, there is a lower chance for a short squeeze, pointing to the fact that, for this week, EUAs will most likely react to developments related to the weather, and movements in Dutch TTF.
On May 11, gas storage reached 63.7% capacity, showing a slight increase from the 62.8% recorded on the same day in 2023. Germany anticipates a record output from its extensive solar panel infrastructure, as forecasted by a Bloomberg model. Europe braces for warmer-than-normal weather over the next fortnight. Meanwhile, Asian spot LNG prices surge amidst indications of heightened demand. Notably, renewables contributed a historic 30% share of global electricity generation in 2023. Kazakhstan and Uzbekistan forge plans to supply green energy to Europe via Azerbaijan. However, doubts loom within the energy industry regarding the timely implementation of Germany's Power Plant Strategy.
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Analysing the technical aspects of this product, we observe a "Triple Top" pattern forming as the price wad closing under 74.25EUR amidst some noise before retracing downwards. Typically, such a pattern signifies bearish sentiment, potentially indicating a decline to around 65.8EUR. However, prior to that, there exists robust support at 70.02/69.80 (Mid Bollinger / 61.2% of significant Fibonacci retracement), aligning closely with a psychologically crucial level. Both FSI and RSI indicators corroborate a minor bearish movement, though it may not suffice to drive prices significantly lower. On the upside, the chart's current upside potential is capped around the 77 EUR mark.
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