EU carbon prices dipped for the second consecutive session on Thursday as falling power prices quelled buying appetite.
The Dec-15 EUA contract settled down 7 cents at €8.37 on ICE, near the middle of the day’s €8.32-8.47 range, on fairly brisk turnover of 14.3 million.
The benchmark EUA futures stayed beneath their middle Bollinger band and 20-day moving average of €8.49, but above their lower Bollinger band of €8.27, a technical level that has provided support this week.
Traders said carbon fell due to falling German power prices, which shed 1%, and did not react to news that an opinion published by Europe’s top court earlier on Thursday may force the European Commission to allocate fewer free allowances to industries.
“It looks like the market needs more clarity on that to take a position,” one trader said.
Weaker power caused German clean dark spreads to shrink, with a drop in coal prices and a stronger euro only partially offsetting the measure of profitability.
The calendar 2017 and 2018 spreads are both at multi-month lows and have fallen every session this week to lose 13% and 18% respectively.
“I am a little surprised that despite this drop in dark spreads, carbon is still at this level,” said another trader.
“I was afraid it might drop to €8.20 but it looks like a lot of traders see this price as a good opportunity to buy,” he added, identifying falling coal and a potential rebound in the euro as factors that could send the spreads back up in the coming days.
Earlier in today’s session, the EU sold 2.918 million spot EUAs at 2 cents below market, with bid coverage of 2.87 – well above Wednesday’s six-month low bid coverage of 1.47 bid still below the year’s average of 3.10.
EU industrial production rose 0.1% m/m in September, EU data showed today. The figures reverse a 0.2% decline in August but are far below September 2014’s m/m increase of 1.8%.
By Ben Garside – firstname.lastname@example.org