EUAs dipped slightly on Monday as analysts gave a neutral outlook, while prices continued to consolidate in a narrowing technical formation that could force a breakout by the end of the month.
The front-year EU Allowance futures on ICE settled down 7 cents at €4.88, near the middle of the day’s tight €4.83-4.95 range on slim volume of 8.2 million.
Volume across other vintages was even more lacklustre, with fewer than 900,000 units changing hands.
Prices remained within the technical ‘pennant’ formation that has taken shape since mid-February, which typically culminates in prices emphatically breaking either to the upside or the downside.
“This declining line [making up the top of the pennant] might limit gains this week as there is not much that could help the price in breaking this resistance. The 20- and 30-day moving averages met on Friday at €5.00. If the former is able to climb above the latter, it would be a positive sign for the next days,” said Bernadett Papp, an analyst with Budapest-based Vertis.
“Until the publication of the verified emissions data for 2015 [on Apr. 1], however, there is no event expected to influence the price. The Dec-16s might therefore consolidate around €5 again this week.”
“€4.77 was last Tuesday’s low and €5.04 capped upside on a number of occasions, so things are still ‘in the mix’ and we still seem pretty happy to knock around the €5.00 mark, which is … the most actively traded price in the last month or so,” said Clive Lambert of technical analysts FuturesTech.
“We’ve been going sideways since the middle of February, basically. And we still need to get above €5.49 to give a buy signal.”
Virtuse analyst Anatoly Stolbov also gave a neutral outlook for the week, saying EUA prices would be supported by the week’s auction volumes, which although virtually flat week-on-week at 13.77 million is the lowest so far this year due to Friday’s Easter holiday.
The market reaction was muted to today’s EU auction, which cleared 2 cents below market at €4.86 and was roughly in line with the year’s average bid coverage at 2.25.
The energy complex also gave little direction, with German clean dark spreads barely budging as lower coal and carbon prices were cancelled out by a dip in baseload power prices.
A rush to buy for compliance in the week after Easter is the market’s only hope of a spike upwards, according to traders Redshaw Advisers, referring to companies topping up their inventories ahead of the end-April deadline to cover 2015 emissions.
“With a market in reasonable balance, any downward moves are likely to be muted until this interest dries up in mid to late April,” they said in a weekly note to clients.
European emissions exchanges are closed on Mar. 25 and 28 for Easter.
By Ben Garside – ben@carbon-pulse.com
