SparkChange Carbon Market Monthly Report (September 2023)

October 6, 2023

September Developments:

  • The downward trend from mid-August carried over into September with prices reaching nearly €80/tonne in the first half of the month. Alongside this price development, investment funds – according to the CoT Report1 – showed a further decline in EUA positions from a net short position of 12m beginning of September to a net short position of 22m by the middle of the month.
  • Even with prices increasing again to levels around €84/tonne by 25th September, the net short position reduced only slightly; to roughly 18m by end of September.
  • The net short position by funds is likely driven by overall negative fundamental developments – EU industrial production down by 2.2% yoy by end of August; emissions from power generation overall significantly down yoy; and furthermore, decreasing clean dark spreads in Germany since mid-July.

Outlook

  • With high auction volumes and a slightly negative demand picture, prices potentially continue to be under pressure in the coming weeks and months. Additionally, with winter season about to start temperatures will play an increasing role again when it comes to emissions from the power sector.
  • Next to emissions, hedging demand from utilities will be a key determining factor for price formation going forward. In the light of this, the development of clean dark spreads will be an indicator for hedging demand.
  • With no regulatory events being expected before end of year, the market will be driven by supply and demand fundamentals.

Key Events to Watch:

  • Carbon Forward conference 11-13 October with Jan Ahrens, CEO of SparkChange, participating as speaker on the first day.

‍

1 Commitment of Traders report published by the Intercontinental Exchange

September 2023
Download
Oops! Something went wrong while submitting the form.

DISCLAIMERS
This communication has been provided to you for informational purposes only.
‍
This communication is not intended to constitute, and should not be construed as, investment advice, financial promotion, investment recommendations or investment research.

This communication is not intended as and is not to be taken as an offer or solicitation with respect to the purchase or sale of any security or interest, nor does it constitute an offer or solicitation in any jurisdiction, including those in which such an offer or solicitation is not authorised or to any person to whom it is unlawful to make such a solicitation or offer. Distribution of information contained in this communication may be restricted by law. Persons receiving this communication should inform themselves about and observe any such restrictions. Any dissemination or other unauthorised use of this information or documents by any person or entity is strictly prohibited.
‍
SparkChange believes the information in this communication to be correct at the date of issue. However, no representation or warranty is given as to the accuracy of any of the information provided. Some information in this communication is based on information given/obtained from independent research providers that SparkChange considers to be reliable. Analysis provided in this communication may be based on subjective assessments and assumptions and can use one among several alternative methodologies that produce diverse results. Hence, analysis and projections should not be seen as factual and should not be relied upon as accurate predictions of future performance.