EU Market: Carbon fades after hitting one-week high of €8.65

Published 21:23 on December 4, 2015  /  Last updated at 21:23 on December 4, 2015  / Ben Garside /  EMEA, EU ETS

EU carbon prices hit a one-week peak of €8.65 on Friday but faded in the afternoon amid heavy volumes to post a small weekly loss of 6 cents.

EU carbon prices hit a one-week peak of €8.65 on Friday but faded in the afternoon amid heavy volumes to post a small weekly loss of 6 cents.

The benchmark Dec-15 EUA contract settled down 7 cents at €8.52 on ICE, near the bottom of the day’s €8.50-8.65 range on strong turnover of 36 million, 19 million of which came as block trades.

The majority of the activity on the front-year futures appeared to be linked to position rolling.

Some 39.4 million units were traded along the rest of the futures curve, also likely related to rolling, with less than two weeks away from the Dec-15 contract expiry.

With a total 58.5 million allowances changing hands, Friday was one of the busiest trading days in recent memory.

There was no direction provided from the energy complex, with German clean dark spreads ending little changed.

However, they posted strong gains across the week, mainly due to a stronger euro after Thursday’s ECB meeting surprised traders with a less-than-expected interest rate cut.

This helped make coal cheaper for continental utilities, and widened the calendar 2016, 2017, and 2018 spreads by 15%, 17% and 17% respectively week-on-week.


Germany’s sale of 3.2 million spot EUAs cleared 3 cents below market, a similar level to this week’s previous three sales.

Bid coverage was also on a par at 2.8, versus the week’s average 2.7 and the year-to-date average of 3.1.

Next week’s auction supply climbs back to 15.06 million with the addition of the UK’s fortnightly sale, up from 11.9 million in sales this week.

It will be the penultimate week for 2015’s auctions ahead of the holiday break.

Three sales take place the week starting Dec. 14, with a total 8.6 million allowances coming to market.

Below are this past week’s EUA auction results, featuring the clearing price, distance to front-year EUA futures in the secondary market, and bid-to-cover ratio:

30/11/2015 EU 2,918,000 €8.55 -0.02 2.51
01/12/2015 EU 2,198,000 €8.52 -0.03 3.19
03/12/2015 EU 2,198,000 €8.44 -0.02 2.33
04/12/2015 DE 3,198,000 €8.56 -0.03 2.80

And next week’s scheduled sales:

07/12/2015 EU 2,198,000
08/12/2015 EU 2,198,000
09/12/2015 UK 3,123,000
10/12/2015 EU 2,198,000
11/12/2015 DE 3,181,500


Implied EUA carry trade annual returns German clean dark spreads
Dec-15 Dec-16 Dec-17 Dec-18 Cal Yr Price Wk chg
Spot 0% 0.899% 1.030% 1.221% 2016 €4.66/MWh +0.60
Dec-15 0.939% 1.051% 1.232% 2017 €3.23/MWh +0.48
Dec-16 1.163% 1.390% 2018 €2.35/MWh +0.34
Dec-17 1.609% (based on 36% efficiency factor)
(does not include transaction costs)


By Ben Garside –