European carbon eased on Monday on the back of weaker German clean dark spreads, but analysts said EUA prices could be supported this week by reduced auction volumes.
The front-year EU Allowance futures trading on ICE Futures Europe closed down 3 cents at €8.59 on moderate volume of around 8.8 million.
The benchmark contract dipped to a six-day low of €8.52 amid a brief bout of heavy selling around 0815 GMT before climbing back shortly after. They then dithered between €8.56 and €8.61 through steady afternoon trade.
Volume down the EUA futures curve was also moderate at 2.1 million changing hands on the Dec-16s, 600,000 on the 17s and 1.8 million on the 18s.
“EUA prices are likely to consolidate at current levels amid neutral signals from technical indicators. The recent bull run is expected to come to an end following the bearish start on Monday morning,” analysts at Thomson Reuters Point Carbon wrote in an emailed note.
“Some support could come from favourable clean dark spreads and lower total auctioning volumes this week due to the lack of the fortnightly UK auction.”
German calendar-year clean dark spreads dropped by upwards of 8% on Monday, giving back all of last week’s gains, as next year ARA coal gained on ICE and German baseload power fell on EEX.
AUCTIONS
EU governments are due to auction 11.95 million EUAs this week, down from 15.08 million last week.
Last month, they sold 60.17 million allowances across 18 auctions, for an average price of €8.35 each. The sales on average attracted 19.3 bidders each, which was the most since Feb. 2014.
Successful bidders brought home an average of 239,160 units per sale, which was the most since July.
A group of 25 member states will also offload 933,000 spot EUAAs this Wednesday.
On Monday, they sold 2.92 million spot EUAs for €8.54, in an auction that cleared a cent below market and attracted interest worth a total 11.79 million units from 23 bidders, which was the most to participate since Oct. 8.
The oversubscription rate was also the highest in six sessions, indicating more appetite than had been seen last week, when the five auctions attracted averages of 7.38 million in bids from just over 18 bidders.
“If EUAs don’t make gains this week then we can expect a price correction downwards towards €8.25 and possibly further,” said dealers Redshaw Advisors in a note to clients.
They cited a report released by Energy Aspects late on Friday, which predicted that rising LNG imports into Europe will put downward pressure on EUA prices.
That led the London-based analysts to slash their EU carbon price forecasts between 2017 and 2030.
“With Energy Aspects’ news spicing up the mix, this week’s price developments will set the scene for November, (and) any sign of weakness creates the risk of a small price rout. However, (Energy Aspects) still predict higher prices next year, so any price correction is likely to be relatively short lived,” Redshaw added.
Despite a slowdown in price growth seen on the Dec-15s over the past week, the bellwether contract managed to post a 6% rise in October, and analysts are predicting that EUAs more or less hold these levels through the rest of the year.
“Should the rally continue, the resistance levels are now the 2015 high at €8.71, the upper Bollinger band at €8.76 and the lower edge of the gap from 2012 at €8.85,” said Vertis’ Bernadett Papp.
By Mike Szabo – mike@carbon-pulse.com
