Testing uptrend support at EUR80, pressured by lower energy complex

By Frank O. Brannvoll, Brannvoll ApS, Denmark

The carbon market saw a sharp drop towards the major support at EUR80-85/t as market players finalised compliance buying. Lower oil, gas and coal prices forced power prices down and led the drop in carbon prices. In addition, power demand has fallen due to warmer than forecast weather.

The UK ETS system widened the margin to the EU ETS in April, as the UK is not expected to deliver the same harsh tightening as in the EU. The December 2023 spread rose considerably from EUR5 to EUR18.

The industrial sector is still holding back on buying due to fear of a reduction in output, while the speculators in the market, who had been driving the rally, were reducing their long positions towards neutral.

EUA front-year contract, May 2021-April 2023

The market remains on a long-term uptrend based on the new measures being implemented and support holding at EUR80. For the next month, a range of EUR80-90 is expected.

The EUA in December 2025 is now trading below EUR100 while for 2030 a sharp decline to EUR110 has been indicated.  Brannvoll ApS expects a range of EUR60-100 with an average of EUR85 for 2023.