EU carbon prices slumped towards €6 on Monday amid very thin turnover hampered by the lack of auction and absence of many UK-based traders.
The benchmark Dec-16 EUA futures ended down 5 cents at €6.13, having reached as low as €6.02,on volume 5.9 million.
Carbon prices have been highly volatile over the past few weeks, rallying as much as 50% to a three-month high of €7.07 last week before easing back on profit-taking, with daily volumes sometimes seen topping 40 million for some sessions.
This week’s auction supply drops 40% week-on-week to 10.4 million, with no sales held on Monday and Thursday, which are each public holidays in different parts of Europe.
After this week, weekly EUA auction volumes will rise slightly to around 13.8 million units until mid-June.
This week also represents an end to any compliance buying for 2015 with the passing of the Apr. 30 deadline.
The energy complex gave a bearish signal, with Brent oil prices falling about 2% towards $46/barrel as data showed monthly output from OPEC producers was close to an all time peak.
German power prices dropped 95 cents to €24.00/MWh on EEX, giving back more of the strong gains recorded in the past few weeks.
ANALYST OUTLOOK
Analysts predicted a calmer week ahead, with Thomson Reuters Point Carbon giving a neutral outlook.
“Lower auction volumes and reduced trading activity due to the two public holidays this week could act as tranquilizers for a nervous market,” they said in a note to clients.
“However, we cannot rule out more significant price moves in either direction given the recent market developments. While our short-term technical outlook is slightly bearish we think that the upward trend line dating from late March and mid April could act as support,” the added, referring to a trend line that reached around €6.00 today.
“The price might take a break and consolidate near the current levels. The lower auction supply might support the price,” said Bernadett Papp at brokers Vertis.
She identified €6.29 and €6.58 as the next levels of technical resistance, adding that the next support at the 20-day moving average around €5.73 may be tested if lawmakers are reported favouring the less ambition ETS reform options that senior MEPs have outlined.
“We expect the price to consolidate,” said Libusa Reveszova at Virtuse, adding that a price correction may drag prices back below €6.
By Ben Garside – ben@carbon-pulse.com
