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At the close of Friday’s trading, EUAs registered a marginal weekly decline of 1%. Throughout the week, EUAs exhibited a strong correlation with the Dutch TTF market. Anticipation of more pronounced market movements persists due to supply risks linked to potential disruptions in Russian pipeline flows, amid escalating tensions with Ukraine.
Looking ahead to this week, there exists a potential for EUAs to ascend in conjunction with global gas prices, driven by new Russian attacks on Ukraine’s gas storage facilities, which have led to an uptick in global gas prices. Furthermore, wind and solar energy have achieved new milestones, now constituting 30% of EU electricity generation and surpassing fossil fuels for the first time. Consequently, the market may experience a more neutral trading trajectory with potential sideways movement, though heightened volatility is expected due to the ongoing tensions in the Middle East.
Auction Volume: 13.4 million EUAs, representing an increase of 2.3 million compared to the previous week.
Energy Fundamentals:
• Gas Storage: As of August 10th, gas storage levels stand at 87.3% full, a slight decrease from 88.5% recorded on August 10th, 2023.
• Goldman Sachs Forecast: EU allowances could potentially reach levels in the 130s.
• Geopolitical Developments: European gas traders are avoiding Ukrainian storage facilities following recent Russian attacks.
• Germany’s Transition Targets: Ongoing discussions about Germany’s greenhouse gas emissions and energy transition goals.
• Azerbaijan's Role: The significance of Azerbaijan’s gas exports is increasing as the EU becomes more reliant.
• Oil Market: A 3% weekly gain in oil prices, bolstered by positive economic data.
Investment Funds:
• Speculative Positions: The net short speculative position held by investment funds decreased to -19.04 million EUAs as of July 26th (compared to -25.5 million EUAs on July 19th).
• Gross Positions: Gross short positions decreased to -56.94 million EUAs (from -63.64 million EUAs), while gross long positions slightly declined to 37.89 million EUAs (from 38.13 million EUAs).
Market Prices:
• Indicative Dec24 EUA Price: €72.50
• Indicative Spot EUA Price: €71.46
• YTD Dec24 EUA Price: €66.29
• MTD Dec24 EUA Price: €70.35
Chart A: December 2024 EUA Price (EUR)
Technical Analysis
From a technical perspective, if the price closes above 71.75 EUR today, we may observe a resurgence in bullish momentum, potentially propelling the price above 75 EUR. Both RSI and MACD indicators suggest there is still room for upward movement, although the daily chart's CCI indicates the market is approaching overbought territory. Conversely, 70.75 EUR serves as the initial support level; a breach below this could see the price drop towards the 70 EUR mark.
Chart B: December 2024 EUA Price (EUR) - Technical
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