The CO2 Market 27.03.2019

EUAs continued Monday’s slow and steady rise, closing 2.9% higher at €21.55. Carbon kept pace with German power, while gas rose 1.4% and coal advanced 1%.

While prices have risen by more than 4% since Friday, there doesn’t seem to be much conviction to this move. Block trades continue to account for nearly half the total volume on ICE Futures (nearly 17 million EUAs yesterday), which suggests investors and utilities are managing their positions quite actively, but screen volume is trending lower since the start of the year as Brexit continues to weigh on the market.

Today, UK Parliament will hold a series of “indicative votes” on various alternatives to the existing agreement. These votes are not binding on the government, but will demonstrate what option Parliament may support. However, it’s not at all clear whether:

a) the government will adopt the favoured alternative and seek to re-open he withdrawal agreement, or

b) the European Union would be willing to re-open talks on the withdrawal agreement.

Our outlook for tomorrow is therefore neutral. It’s seems likely that the market will continue to grind higher in the absence of any change in fundamentals. However, it’s likely to be a quiet day as traders focus on events in Parliament.

We note that EUAs today rose from just above the 50% Fibonacci retracement to just below the 38.2% retracement of the February-March rally. So resistance at €21.58 will be tested very quickly, and a move above would then target the €21.80-21.85 band that has acted as a support area most recently.

EU ETS News

·      Linkage between Switzerland and EU ETS systems approved to be effective from the 1st January 2020

·      EU Parliament accepts proposal to increase emission reduction goal to 55% for 2030, boosting the current target by 15%

·      IETA (International Emissions Trading Association) will organize a meeting in Brussels on the EU ETS Strategy on the 2nd April 2019, and our CO2 international consultant, Casiana Fometescu, will be present at this event and will report you the upcoming news on the market.

Source: Carbon Reporter, London