08/02/2024

The end-of-year rally came to a halt in the first session of 2024, on January 2nd, as EUAs experienced a single-day loss of 4.41 €/tonne, dropping below the lows of December 21st with intra-day dips at 74.59 €/tonne for DEC24 EUAs. During the first week of the year, EUAs lost 5% and formed a trading range 6.66 €/tonne wide. However, renewed volatility did not correspond to renewed liquidity. Except for January 2nd, where losses renewed interest in negotiations and DEC24, the session recorded daily trading volumes above 20 million EUAs. The remaining trading days were weaker, with liquidity reaching lows on January 5th (12.21 million EUAs traded). The first support was represented by the 20-day moving average around 74.69 €/tonne. Throughout the last week, DEC24 prices struggled to surpass the 50-day moving average at 77.51 €/tonne, below which they moved at the beginning of the year’s collapse.

During the second week of January, a very weak market was observed as DEC24 EUAs experienced a collapse of 9.13% compared with Friday, January 5th, reaching new lows since April 2022, right after the Ukraine invasion. On Monday, January 8th, the biggest decline and the most volatile session of the week were witnessed: -3.93% on a daily basis and a trading range limited by highs at 76.20 €/tonne and dips at 71.93 €/tonne. The exchange was strongly oversold, with an RSI at 28 points and a CCI at -148.

During the third week of January, weak prices persisted on the exchange as EUAs lost 3.28% from Friday, January 12th. DEC24 EUAs reached new lows since April 2022, moving below 63 €/tonne multiple times towards the end of the week, with lows at 62.46 €/tonne reached on Thursday, 18th. Bearish pressures had several causes, including diminished global demand, an increase in the offer through the REpowerEU plan, and bearish pressure from significant financial operators shorting positions (open interest on short positions increasing since January 8th). The lack of support from the prices of the rest of the European energy complex contributed to the downward movement of EUAs for the whole week, with a slight bounce on Friday’s session after the market heavily entered oversold territory. At the beginning of the following week, prices entered oversold territory again with an RSI at 27 points and a CCI at -116, a bearish MACD, and a weak stochastic. The next strong support for prices was found at 55 €/tonne, near 2022’s lows, while the market lacked a true technical resistance.

During the fourth week of January, the market remained weak, although Tuesday and Wednesday showed a bounce in DEC24 EUA prices. Starting from Thursday, the market decreased again. The front-year price closed the week substantially unchanged from Friday, January 19th (-0.11%), erasing all the mid-week earnings. A first resistance area could be played by the 20-day moving average at 67.86 €/tonne, while a first area of support could be seen at 57.58 €/tonne, the then level of the lower Bollinger band (although the true technical support lay at 55 €/tonne, the lows from 2022 after the Ukrainian invasion).

In the last week of the month, from January 29th to February 2nd, the market remained weak, lacking a clear direction. Similar to the previous week, the market closed substantially unchanged last Friday, February 2nd, leaving only 0.13% on the ground from Friday, January 26th. DEC24 EUAs highlighted the uncertainty of market operators, alternating between bullish and bearish sessions, unable to surpass 65 €/tonne and recovering quite quickly when moving below 62 €/tonne. EUA prices remained of difficult interpretation.

 

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Francesco Rogato
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With his commodity trading experience, specializing in the energy sector, and extensive knowledge of European exchange platforms and Over-The-Counter markets, he brings his advanced analytical view on the EU ETS carbon market in a monthly short blog, “Let’s Talk Carbon”.