Market turmoil in European energy markets last year continues to have an impact on the hedging activities of many of the continents utilities, with some putting their hedging activities on ice as market liquidity evaporated and margin calls soared. The question now is whether or not utilities are done and dusted for their 2022 compliance needs. In this article I delve into the financial results of one of the most active utilities on the EU carbon market.
Investment funds have also recently been roiled by turmoil of a different kind. The re-emergence of financial and macroeconomic uncertainty after the collapse of a number of banks, beginning with SVB and ending (as far as we know) with the bailout of Credit Suisse. The latest Commitment of Traders (COT) data w/e 17th March shows that investment funds cut their net long position as carbon approached €100 per tonne, from 20 million EUAs to 8.4 million EUAs. That mirrors the pattern observed during the two previous occasions when the EU carbon market made a play for €100. Will traders have the confidence to rebuild those positions, betting that financial authorities have done enough to stop another domino from being toppled (see Are investment funds buying the rebound in carbon?)?
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