AFS Energy EU ETS Report Week 32

At Friday’s settlement, EUAs recorded a weekly gain of 4%, despite a 0.8% drop for the day. Throughout the week, EUAs moved in strong correlation with Dutch TTF.

For this week, there is a possibility that EUAs will decline in tandem with global energy markets. Concerns about a potential recession leading to lower emissions could drive EUAs lower. Additionally, renewable energy generation reaching a new record in the EU could strengthen this trend. As a result, a possible scenario is that EUAs will trade in a sideways to bearish trajectory for the week, with increased volatility anticipated due to a possible escalation of tensions in the Middle East.

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Auction Volume: 11.1 million EUAs, 2.3 million more than last week.

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Energy Fundamentals:

• Gas Storage: As of August 3rd gas storage is at 85.7% full compared to 86.5% on August 3rd, 2023.

• Israel prepares for an attack from Iran, as the US pushes for a cease-fire in Gaza.

• Global markets’ sell-off intensifies, on fears of US recession and a possible escalation in the Middle East.

• Report shows wind and solar power generation had overtaken fossil fuels in EU Energy production for H1, 2024.

• Germany published a draft legislative proposal to integrate its national emission system (nEHS) within the ETS2.

• Natural gas prices drop due to oversupply and lower demand concerns.

• Oil prices slip on fears of a US recession.

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Investment Funds:

• Speculative Positions: The net short speculative position held by investment funds decreased to -25.5m EUAs on July 26th (vs  -23.38m EUAs on July 19th).

• Gross Positions: Gross short positions increased -63.64 million EUAs (vs. -61.75 million EUAs), while gross long positions decreased to 38.13 million EUAs (vs. 38.37 million EUAs).

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Market Prices:

• Indicative Dec24 EUA Price: €68.27

• Indicative Spot EUA Price: €67.29

• YTD Dec24 EUA Price: €66.15

• MTD Dec24 EUA Price: €70.08

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Chart A: December 2024 EUA Price (EUR)

Technical Analysis

Based on the current market conditions, there is a significant price retracement occurring today. The FSI and RSI indicators on the daily chart suggest that there is potential for further decline. For these indicators to confirm a bearish trend, the market would need to drop to the mid Bollinger Bands and the 38.2% Fibonacci retracement level, both around 67.80 EUR. It is possible to anticipate a decline to the 66 EUR level, followed by a further drop to 65 EUR, which serves as a strong psychological support level.

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

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AFS ENERGY B.V.

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