By Frank O. Brannvoll, Brannvoll ApS, Denmark
For once there were no new record highs. The carbon market was in the shadow of coal and gas markets, and reflected speculators liquidating long positions and seeing a fall below support at €60. In addition, it is also reflecting a lack of specific carbon news and an overall disappointment in terms of the pledges made at COP26.
EUA front-year contract, January 2019-January 2022
No new issues were tabled, and the market fell to a low of key support at €54 before recovering on the overall long sentiment present.
Furthermore, with coal’s sudden drop in price, it again became cheap to use coal for power production, and therefore, setting new demand for carbon.
The price is still supported by proposals to reform the EU trading scheme, including the following key measures:
• rebasing of the cap, increasing the linear reduction factor, reducing EUAs and aiming to phase out free EUA allocations
• setting up a Carbon Border Adjustment Mechanism (CBAM).
The December 21 contract was unchanged MoM at €60. The unchanged technical view uptrend covers a €57-65 range for the December month. Major support is found at €57 and €50 while resistance is at an all-time high of €66. The long-term trend is still moving upwards and would need to break €50 to abandon this. Brannvoll ApS forecasts for 2022 a trading range of €50-75 and an average price of €68.
However, keeping an eye on the general energy complex and coal in China is recommended.
