Overview

February 18. Technical indicators suggest the contract is now overbought after a week of sustained buying, raising the risk of a near-term correction. While TTF natural gas has also edged higher, the strength in carbon looks primarily compliance-driven. This is the first year the ETS surrender deadline falls in September rather than April, and with only a few weeks to go, compliance buying appears to be underpinning demand. A low wind generation forecast in central Western Europe is providing additional support, but the broader backdrop is one of traders returning from summer and repositioning ahead of the deadline. With Q4 following immediately afterwards (traditionally a bullish period for the EU ETS) momentum may remain strong into the winter.