A recent report from ABN Amro revealed that the current upward trend in the carbon market is expected to be short-lived “as the continent is ending the heating season with higher-than-average gas storage levels, sustained supplies, and suppressed industrial demand.”

According to the report, the current surge in carbon prices, with EUAs now trading steadily above €60,  was mainly driven by rising gas with a strong correlation with TTF over the past months, which “even reaches a one-to-one level in some days.” 

However, as the heating season ends, demand for gas typically declines during spring before eventually rising again later in the summer for refilling purposes or cooling needs. The current gas storage level at 58,90% as of 26 March, suggests that Europe is in a comfortable position preparing for the next winter season.

At the same time, demand for EUAs is expected to remain low amid “, the weakness in industrial activity, triggered by high interest rates in Europe and sluggish global economic growth”. Also, “demand for allowances is expected to remain low from the power sector in the coming months,” due to increased renewables combined with lower conventional power generation.   

“Based on the current information, our outlook for EUA is bearish and we expect the price to range between 52 and 57 in March and April,” predicts ABN Amro, warning that the carbon market continues to remain vulnerable to “any unforeseen escalation in geopolitical risks.”

 

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