Last week, the benchmark contract posted its first weekly gain of 2024, driven by the short covering of positions held by investment funds and an increase in the price of Dutch TTF. However, the overall outlook for EUAs remains bearish.

‍Auction volume: 11.1 million EUAs, 2.3 million less than last week.

Looking ahead, a few bearish fundamentals are on the horizon, suggesting a possible continuation of the downward trend for EUAs. Nevertheless, as mentioned in our previous reports, there is significant buying interest from compliance operators around the €50 level. Consequently, we expect the benchmark contract to maintain its sideways trajectory and trade within the 50-56 range. Any breach below the €50 level may indicate a significant short-term decline and a continuation of the existing downward trend. Gas storage levels dipped to 61.66% full as of February 29, down from 63.26% recorded on February 23. Meanwhile, market analysts anticipate the TTF Front-month contract to regress to 20 levels. Winter 2023 marked a notable milestone as the warmest winter on record. Mild weather is expected to persist across most of Europe into early March. In the energy sector, OPEC+ has decided to extend oil output cuts through the second quarter. Looking towards the future, Europe aims to strengthen its renewable energy capacity, with plans to add around 262 GW of wind power by 2030.

Technical Analysis

The Relative Strength Index (RSI) has emerged from oversold territory and shows a slight downward trend, suggesting a potential further decline in price. Last week, the price hit the Fibonacci 61.8% retracement level, indicating a possibility of revisiting the recent low of €51.08. Beyond that, robust support lies at the lower boundary of the Bollinger Bands at €50.82. While €50 stands as a significant psychological support level, it appears less probable that it will be breached this week.

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