Analysts at Polish-headquartered emissions brokers Consus have slashed their near-term EU carbon price forecast by more than 20% in light of the steep fall in EUA prices during the first seven weeks of the year.
Consus now expects spot EUA prices to average at €6.02 in Q2, which while well below their previous forecast of €7.69 for Dec-16 futures prices submitted in the most recent Carbon Pulse poll, represents a 23% gain on current prices around €4.90.
The analysts said the recent allocation of free EUAs by governments for 2016, which some observers say may be near completion, was also a factor in the decision to cut their forecasts.
“It is now known that not all of the free allowances were [distributed] on time, which means subsequent allocations will be entering the market, increasing the supply pressure on prices,” Consus said in an emailed note on Thursday.
The analysts added that prices could see a boost from last-minute buying in the run-up to the Apr. 30 deadline to hand in carbon units for 2015 EU ETS compliance.
The firm also slashed its average Q1 spot price forecast to €5.69, down from €7.78 previously.
The next-day delivery EUA contract on ICE has posted an average settlement of €5.91 so far this year, meaning that Consus expects spot prices to average around €5.20 through the remainder of March.
By Mike Szabo – firstname.lastname@example.org