Greece bailout rescues EUAs from write-down as analysts hold price forecasts

Published 16:54 on July 31, 2015  /  Last updated at 17:20 on July 31, 2015  /  EMEA, EU ETS  /  No Comments

Analysts at Energy Aspects left their EUA price forecasts unchanged on Friday, judging the Greek bail-out and higher-than-expected temperatures to have removed a bearish weight that had been hanging over the bloc’s carbon market.

Analysts at Energy Aspects left their EUA price forecasts unchanged on Friday, judging the Greek bail-out and higher-than-expected temperatures to have removed a bearish weight that had been hanging over the bloc’s carbon market.

Last month we highlighted that an eventual Grexit would probably lead us to write down these forecasts. With the immediate risk of that scenario having fallen substantially, the August market can probably take something of a breather before the winter period,” the analysts said in a monthly report.

They added that higher-than-expected temperatures in late June and July had boosted thermal generation, increasing their emissions forecast for the year by 1.1% or 20 million tonnes.

The report means Energy Aspects have left their price forecasts unchanged since January in projecting benchmark EUA prices to average €8 over Q3 and €8.50 over Q4.

They expect prices to average €10.50 in 2016 and gradually climb to €21 by 2020 as the MSR mops up the market’s massive oversupply and to average €44 over 2021-2030.

INDUSTRY HOARDING

The analysts said the publication of the European Commission’s post-2020 ETS review proposal contained little that was not expected, though added that plans to significantly reduce free allocations to some heavy industry could add bullish pressure.

“(It) may make industrials more cautious about selling current levels of surplus allowances,” they said.

“In 2015, such concerns are likely to be of only minor importance to even the most long-sighted of the industrial participants. However, as we go forward, those concerns will become increasingly relevant, and holds out the considerable promise of market tightening in the period from around 2018.”

The proposed changes to free allocation prompted Thomson Reuters Point Carbon analysts to increase their EUA price forecasts by one euro over 2017-2020.

By Ben Garside – ben@carbon-pulse.com

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