EU carbon made slight gains on Thursday to take back some of the week’s losses though traders blamed falling power prices for preventing a more sustained rally.
Front-year EUA futures on ICE settled up 7 cents at €8.47, on moderate volume of 8.6 million units traded.
The benchmark contracts notched a 10-cent trading range between €8.38 and €8.48 in an otherwise unremarkable session.
Volume down the EUA futures curve was healthy, with 3.3 million on the Mar-16s, 6 million on the Dec-16s, 1.5 million on the Dec-17s, and 800,000 on the Dec-18s. However, most of this activity appeared to be linked to spread trades.
Prices have more or less stabilised following four straight days of losses, which saw more than 3.5% shaved off the Dec-15s since their three-year high of €8.71 touched on Oct. 29.
Traders seized on the opportunity to short the market as it appeared to be overheated.
“I was targeting a drop to €8.40-8.45 to close my short, so this is a comfortable point for me to go long again,” one speculator said.
“That said, I don’t mind at all if we drop further, possibly to €8.30, as that would be a good opportunity to average down.”
He said the Dec-15s appeared earlier as though they would hold their gains and potentially end Thursday above €8.50, but an afternoon drop in German power dragged EUAs lower.
The calendar 2016 German baseload contract, trading on EEX, was down 15 cents at €29.30/MWh at the time of writing, after having traded as high as €29.50 earlier in the day.
The impact of the decline on clean dark spreads, however, was almost completely offset by weaker coal prices, as the Cal-16 ARA forward on ICE lost 40 cents to a six-day low of $47.75/tonne.
Separately, a group of 25 EU nations sold 2.918 million spot EUAs for €8.40 each, in an auction that cleared 3 cents below market and attracted a total 10.97 million units in bidding interest.
Germany will offload its usual 3.198 million allowances on Friday, before EUA auction levels rise back to 15.08 million next week, from 11.95 million this week.
By Mike Szabo – firstname.lastname@example.org