Even though there is little time left before the end of gas winter, weather has not yet said its last word. The latest increase in European heating demand has contributed to the rise in prompt gas prices, in turn helping to push up forward products. Colder temperatures, however, were just a pleasant addition to the carbon’s bull run, which has had a decisive impact on curve this week.
The influence of EUAs on the gas market was much less pronounced in the past weeks, as carbon was actually ticking over since mid-Feb. Things have changed in the week beginning 8 Mar, when the ICE EUA Dec ‘21 not just exceeded the upper bound of €37-39/tCO2e range, but also set a new record.
In that context, clean spark spreads have recorded a notable increase both in absolute terms and in comparison with clean dark spreads, supporting gas contracts on the curve.
Despite the challenges facing coal, it will remain in the European energy mix for years to come competing with natgas for the regional buyers. Given the increased volatility in carbon market over the course of 2021 amid uncertainty around the reorganization of EU ETS, it is especially interesting to track coal-to-gas switching economics this year.
Source: Yakov Grabar
See original post by Yakov at LinkedIn.