Energy markets will open sideways on Thursday. However, EUAs are rising above 70 euros/t CO2 again, which could have a bullish effect in the short term, especially if it turns into a candlestick reversal signal. A “Three Inside Up” is considered a buy signal in candlestick analysis. The fundamental picture is currently mostly neutral. It is now well known and priced in that the summer will not be so hot after all. There are currently no new strong fundamental impulses. However, the existing support brands for electricity, gas and EUAs could still lead to technical purchases. There have been no sustained new lows on the markets and new downward trends have not yet been established.
Bullish factors
Milosz Motyka is the new Minister of Energy in Poland and a clear supporter of an energy policy shift away from coal towards renewable energy. Poland thus has a new energy minister who is likely to support higher CO2 prices.
Wind and solar are currently below average, wind in Germany increases significantly from 28/07 and then remains above normal until 31/07 according to weather models. PV is forecast below normal until 06/08 with no outlier in the normal range at the turn of the month.
With around 44 GW of nuclear power plant capacity, there are currently significantly fewer nuclear power plants connected to the grid in France than forecast just a week ago (forecast: 48 GW). However, availability is expected to increase steadily over the next few days and reach just under 50 GW by 28/07.
At the EUA-DEC future yesterday, a “Bullish Harami” was pronounced. This initially represents a weak reversal pattern. However, a daily closing price of over 70 euros/t CO2 would turn this into a “Three Inside Up” (stronger candlestick signal), which could trigger further buying pressure on the CO2 market in the short term.
In one month, at the end of August, a larger maintenance window will start again in Norway, with an expected limitation of 100 mcm/d, which represents relevant quantities.
Bearish factors
Cooler temperature forecasts for Germany until August 11 in the latest EC46 model run. But a bit milder further back in the forecast period. However, there is still a high degree of uncertainty in the forecasts.
Gas supply from Norway remains at a high level (nomination for today 320 mcm/d), no unplanned outages at conveying or processing plants. Global LNG supply also remains robust and at record levels.
Rain has raised the Rhine's water levels, but most of the river is still too shallow for cargo ships to travel fully loaded, commodity traders said Wednesday. Further rainfall in the coming days is expected to raise river levels to approximately normal levels over the course of this week, forecasts using data from LSEG show. A situation such as in summer 2022 is therefore unlikely to be repeated.
Neutral factors
No surprising overnight changes in temperature forecasts for northwestern Europe.
There are still no new auction dates for capacities at Rehden gas storage.
The White House announced overnight that Trump will visit the US Federal Reserve this Thursday. This visit follows his threats to fire Fed Chair Jerome Powell, which have unsettled US bond markets.
Trade talks between the EU and the USA are continuing and are reaching the home straight. We believe that a further postponement of the deadline is unlikely. There are signs of a deal with significantly higher tariffs than before April 2 (Liberation Day). However, the stock markets are still likely to take a positive view of a deal, as was the case after the deal between the USA and Japan. However, this has not carried over to energy markets, as there is currently no correlation between EUAs and the equity market.
Following several interest rate cuts, the European Central Bank is expected to pause today and keep the deposit rate at 2.0 percent. Investors are closely following the announced statements by ECB President Christine Lagarde regarding the further interest rate outlook. According to several economists interviewed by Reuters, a further interest rate cut by the ECB is possible over the course of the year, possibly in September.