Overview

The EUA market has been caught between opposing forces for the past few weeks since falling dramatically from the mid-€80s at the end of January and bouncing around the €71-72 mark since. Last week saw the market recover back above €70 with bursts of opportunistic buying of EUAs raise the benchmark
Dec 26 futures price to highs of €74.50, before sellers hit back and drove prices back down again to the new €71 support line.

Fundamentals have not been very helpful to explain market activity since New Year and analysts are hoping that a few weeks without a war breaking out, or political statements from EU leaders about ETS reform, can allow the carbon market to fully price in the impact of reduced auction volumes and any alignment with energy markets moving into Spring. ‘Normal service’ should see EUA prices recovering back towards €80 with more upside risk at these prices.