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Week 18: Bearish signals from macro set to hit against support at €85/t

For European carbon next week, we see bearish signals from the uncertainties in the financial sector and generally weak market sentiment, as reflected e.g. in falling oil prices. Furthermore, fresh data on EUA holdings show that investment funds – a key group of market participants – have turned net short, a fact that will add to the downward pressure. On the positive side, we might see some support once the European Commission presents its calculation of the Total Number of Allowances in Circulation (TNAC), which will decide the number of EUAs to withhold from auctions and channel into the Market Stability Reserve from 1 September. Technical analysis suggests a sideways move next week. Despite the recent testing of the territory below €85, that level still seems capable of providing support. Overall, we have a neutral view for next week.

Looking back European carbon inched down from Thursday 27 April to Thursday 4 May, shedding 1.6% week-on-week. On Tuesday 2 May, carbon jumped on a news story in Carbon Pulse that the REPowerEU monetization of EUAs will not entail extra volumes from the I...

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