Last week, EUAs extended their decline, hitting a 23-month low on Friday. With market fundamentals maintaining a bearish stance and investment funds escalating their short positions, we anticipate the downward trajectory to persist.

Auction volume: 13.4 million EUAs, 2.3 million more than last week. 

Looking ahead this week, we anticipate EUA prices to continue dropping, with compliance buying partially compensating for the prevailing bearish sentiment in the market. Nevertheless, in the absence of significant bullish fundamentals, we anticipate EUAs to trade towards the 55-60 range. 

On February 8, gas storage levels stood at 66.56% full, a slight decrease from 68.46% observed on February 2. This decline comes amidst a shifting energy landscape, as the temperature forecast for parts of central and northern Europe predicts unseasonably warm temperatures, potentially reducing the demand for heating fuels. Consequently, market sentiment towards gas prices has turned bearish, with the TTF front month opening at 26 EUR/MWh and expectations pointing towards further declines. This sentiment is compounded by the dominance of wind power production over gas plants in Europe, highlighting the growing influence of renewable energy sources. As a result, the overall energy complex remains bearish, exerting downward pressure on EUA prices as the market adjusts to evolving supply and demand dynamics.

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Technical Analysis

According to technical forecasts, a closing price above 58.20 indicates a potential bullish surge towards the 61 level, with the second resistance level at 63.50 based on Fibonacci retracement and previous support. Conversely, should the price fall below 57.50 today, there's a possibility, as indicated by the weekly graph, of testing 55.30 EUR before any potential recovery.

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AFS ENERGY B.V.

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