The European carbon market dropped below €79 for the first time in almost a month on Tuesday morning, tracking massive declines in gas prices. The TTF front month was trading around 6% lower amid a combination of peace talks, warmer weather and rumours about a possible price cap.

The carbon market has a lot of price signals to choose from. However, in yesterday’s trading it decided to ignore the latest Commitment of Traders report published by the ICE platform. According to trading data, investors have increased their net long position by almost 5 million allowances or 10% reaching an impressive total of 60 million allowances.

“The main news story yesterday was that the European Commission is planning on implementing a temporary gas price cap,” writes consultancy firm Energi Danmark this morning. However, a European Commission official, quoted by Reuetrs, rejected the rumors. 

The latest weather forecasts suggest warmer temperatures for the next week as well as an upturn in wind generations over the coming weeks. “That in turn may set the stage for a cooling in regional benchmark TTF gas prices” writes Reuters.

We expect the market to continue to be affected by geopolitical developments, mainly news regarding the discussions about a ceasefire in Ukraine. Furthermore, today all eyes are on the talks in Brussels where the Gas Coordinator Group is discussing a possible relaxation of the bloc’s gas storage targets.