European carbon ended flat on Monday, as volume was heavy but prices unfazed by firmer German dark spreads and the start of UN climate talks in Paris.
Front-year EU Allowance futures trading on ICE settled at €8.58, with strong turnover of 15.7 million units.
A further 15.1 million units changed hands along the rest of the curve, making it one of the busiest trading days in several months.
However, the Dec-15s were limited in their movement, remaining within an intraday range of €8.53 €8.62.
The euro fell to its lowest level against the US dollar in more than six months, but the impact on EU carbon prices was muted by higher German power prices, which gained upwards of 0.4% on EEX’s calendar-year contracts.
“The market may end the week around current levels amid neutral policy and technical signals. A drop in auctioning supply will offer support to prices. However, surrounding markets are a source of uncertainty this week,” said analysts at Thomson Reuters Point Carbon.
“From a technical perspective, a test to the downside may be on the cards, but nearby support levels will probably buoy the market back up by the end of the week.”
But Bernadett Papp, an analyst with Vertis, noted that the recent slide seen in the front-year EUAs, which caused a drop of as much as 1.5%, had ceased in a potentially technically bullish sign.
“The lower edge of the increasing trend channel halted the depreciation of the price and there is a chance that the price turns back higher towards the upper edge of the channel,” she wrote in a weekly note.
Papp identified the contract’s technical resistance levels at last week’s high of €8.67 followed by the 2015 high of €8.71, and the support levels at €8.50, followed by the 50-day moving average of €8.38.
“The 20-day moving average crossing the 30-day, and the candles from last week, however, warn traders about possible losses. Should the euro weaken further versus the dollar, the dark spread would worsen and utilities would find less incentive to burn coal,” she said, adding that more dovish signals out of the ECB’s rate-setting meeting on Thursday could further dent the European currency.
AUCTIONS
A group of 25 EU member states sold 2.918 million spot EUAs for €8.55 each earlier in the day, in an auction that cleared 2 cents below market and attracted total bids equal to 7.34 million units.
Monday’s auction concluded November’s sales, in which 59.83 million allowances were sold at an average price of €8.48 each.
The month’s sales attracted an average 18.8 bidders/auction, which was up on the 2015 average of 17.3 and last November’s 15.2, but below the 19.3 seen last month.
November’s sales also saw an average 13.4 successful bidders per auction, slightly above October’s 13.3 and the 2015 average to date of 12.8.
A total 32.75 million EUAs will be sold in December, well below 2015’s monthly average of 54.5 million, as the year’s sales wrap up just after mid-month, ahead of the holiday season.
The EU on Friday published the 2016 auction calendar, with sales beginning again on Jan. 11.
OTHER TRADES
Meanwhile, Dec-15 CERs added 2 cents to €0.61 on volume of 94,000, curtailing the contract’s recent drop of more than 13%.
And in a rare showing, some 150,000 EUAAs were traded via ICE’s Dec-15 futures at €8.43 each, with the same amount transacted via the Dec-15 EUAA/EUA swap at a spread of 15 cents.
By Mike Szabo – mike@carbon-pulse.com
