EU Market: EUAs slip 1.8% as MSR doubts keep buyers away

Published 18:00 on March 9, 2015  /  Last updated at 14:52 on May 11, 2016  /  EMEA, EU ETS  /  No Comments

EU Allowances dipped in thin trade on Monday as doubts over how strongly lawmakers could agree MSR reform deterred aggressive buying.

EU Allowances dipped in thin trade on Monday as doubts over how strongly lawmakers could agree MSR reform deterred aggressive buying.

The benchmark Dec-15 EUA futures closed down 12 cents at €6.73 after quickly falling from the day’s top trade of €6.90 at the open.

Around 10 million front-year units changed hands by the close, well below last week’s average daily volume of 16 million.

Traders said that uncertainty over the MSR was preventing speculators from taking positions as they feared getting caught out by sudden price dips on news about lawmakers’ negotiations this week.

“There might be people who are long, but it’s likely to be a really, really flexible long position with a lot of protection,” said one trader.

Carbon had little support from the rest of the energy complex, which was dragged lower by a $0.90 drop in front-month Brent crude oil prices to $58.88/bbl at the time of writing as two banks put out reports predicting falls from current levels.

EUAs shed 4.3% last week as despite improving German dark spreads providing a stronger buying signal for coal power producers.

Officials from EU presidency holders Latvia will attempt to broker an MSR compromise between member states from 0900 GMT tomorrow, with Poland claiming enough support to block strengthening amendments.

Details of Latvia’s plan emerged late last week but analysts said its lack of reference to a provision to put unallocated EUAs directly into the MSR meant it was weaker than a position by the EU Parliament’s environment committee.

If Latvia manages to get a deal with national governments it must then negotiate the final MSR text with parliament representatives.

Trading house Vertis said the lack of agreement on the MSR, outstanding 2015 EUA allocations and the April 1 publication of 2014 verified emissions data could weigh on the market throughout March.

“At the moment seems to us that all these factors might exercise a downward pressure on the price,” the company said in a blog post.

They added that prices could slip to as low as the 200-day moving average of €6.56, a 2015 low, before swiftly rebounding back above €7.

By Ben Garside – ben@carbon-pulse.com