EU carbon prices rose slightly on Thursday following a government auction that attracted the highest bid coverage for almost two months, withstanding bearish signals from the energy complex as the euro fell on ECB easing talk.
The benchmark ICE Dec-15 EUA contract settled up 4 cents at €8.48, at the top of the day’s €8.42-8.48 range, on hefty turnover of 16.7 million, almost 8 million of which went as block trades.
Some 3 million units changed hands on the Mar-16s, including 2.5 million EFP, while 6.4 million were transacted on the Dec-16s.
The EU sold 2.9 million spot EUAs at €8.44, one cent above prompt prices in the secondary market when the bidding window closed.
The sale attracted a bid-to-cover ratio of 4.26, the highest since Aug. 27 and well above the October average of 3.19.
Secondary prices rose by around 4 cents shortly after the sale cleared but drifted later in the session.
Germany will sell 3.2 million units tomorrow, and next week’s auction volume will rise to 15.1 million from this week’s 11.9 million with the addition of the UK’s fortnightly auction.
There was little carbon market reaction to the keenly-awaited ECB rate-setting meeting.
The euro’s rock-bottom interest rates were left unchanged as expected, but the euro tumbled to a two-week low as ECB President Mario Draghi said the bank’s board had discussed further cuts and quantitative easing to counter weak euro zone inflation.
The euro’s weakness made coal imports more expensive for EU utilities, and along with lower power prices helped to narrow Calendar 2016, 2017 and 2018 German clean dark spreads by 4-5%.
This pushed them to their lowest for seven weeks, two weeks and one week respectively, emitting a bearish signal for carbon.
Once again, no CERs were traded on ICE.
By Ben Garside – firstname.lastname@example.org