EU Market: EUAs slip 1.7% despite strong auction demand

Published 17:49 on April 5, 2016  /  Last updated at 17:49 on April 5, 2016  /  EMEA, EU ETS  /  No Comments

EU carbon prices gave back most of the previous session’s rise to defy a strong auction on Tuesday, though some traders took the move as a mere pause ahead of further gains.

EU carbon prices gave back most of the previous session’s rise to defy a strong auction on Tuesday, though some traders took the move as a mere pause ahead of further gains.

The Dec-16 EUA contract settled down 9 cents at €5.24 on ICE, giving up the bulk of Monday’s 15-cent rise, on steady turnover of 14.6 million.

A notable 4.6 million traded across other vintages, including almost 3.1 million done between the 2017 and 2019 contracts, contracts which are typically used by utilities to buy units for forwards power hedging.

The benchmark front-year contract spent the day in negative territory, failing to move beyond Monday’s settlement, which was just two cents shy of last Friday’s five-week high of €5.35

EUAs slumped in early trade, but jumped 5 cents shortly after the EU auction cleared at €5.26, some 2 cents above market, and with a slightly above average cover ratio of 2.38.

The energy complex gave little direction, with German clean dark spreads slightly higher on the Cal-17 but dipping on the Cal-18 and Cal 19 vintages, as gains in German power cancelled out dips in coal and carbon.

“Looks like bulls took a small pause before trying to attack the €5.49 [resistance level],” one trader said.

He pointed out that some positive impetus could also come from smaller emitters looking to square their positions ahead of this month’s compliance deadline to cover 2015 emissions.

“We are still in a buying month,” he said, adding that downward pressure stemming from last Friday’s data release had largely passed.

However, traders at Redshaw Advisers were wary of a fall from current levels.

“A high of €5.35, €5.34 and €5.33 over the last three days would suggest there is sizeable resistance at this level that will need to be overcome if carbon is to advance further. If it fails to advance it will likely fall back down towards €5.00,” they said in an emailed note to clients.

Last Friday’s preliminary emissions data revealed that seven of Poland’s 11 biggest emitters didn’t report, including PGE’s perennial top-5 polluter Belchatow power plant.

A Polish government source told Carbon Pulse that most of those installations had in fact submitted their data, but these came in too late to check and process the data for inclusion in the EU figures.

By Ben Garside – ben@carbon-pulse.com