Biggest drop ever as financial players have to liquidate or close positions – return to compliance level

By Frank O. Brannvoll, Brannvoll ApS, Denmark

After reaching EUR 98.50, the EUA fell to EUR 68 on December 22, a 30 percent drop. This happened in response to the Russian invasion of Ukraine and the turmoil in all financial markets.

As discussed in the last issue, financial players took profits and new margin calls from losses in other markets put EEA in sell mode.

In addition, rumors suggest that several major Russian trading firms sold EUAs to get cash as they had very large speculative positions.

The EUA fell to 55 euros or 20 percent below the current level. This level attracted regular compliance buyers as there may be more coal and gas to see after initial fears of a Russian gas disruption dissipated.

EUA front year contract, July 2018-December 2020

The market continues to be driven by political news and the short-term energy mix in Europe. Nuclear power in Germany will almost certainly be extended and even reopened to reduce exposure to Russian gas, and Nord Stream 2 is not expected to be launched. This could reduce demand for EUAs.

The expected range is between EUR 60 and EUR 80, while support lies at EUR 60 and resistance at EUR 75 and EUR 80.

Brannvoll ApS forecasts a trading range of 65-100 euros for 2022, with an average of 80 euros. Will be revised if the 100 euro limit is broken.

Posted in Cement News