EU carbon allowances rebounded from a fresh 2015 low on Friday as bargain-hunting speculators anticipated bullish reactions to next week’s governmental negotiations on the MSR.
The Dec-15 EUA settled at €6.51 on ICE, a gain of 5 cents on the previous settlement, after recovering from a morning slide to as low as €6.28, which extended Thursday’s year-low.
The benchmark carbon contract traded in a wide 40-cent range, with around 23 million allowances changing hands, similar to Thursday’s volume and around twice the turnover earlier in the week.
“We ended yesterday at the day’s low so there was still some downward momentum going into today,” said one trader.
Carbon had fallen 5.2% on Thursday as news of a weakened MSR proposal helped pushed prices below a year-long bullish corridor.
On Friday buyers stepped in at around €6.30 to eventually send prices briefly to a peak of €6.62, enough to sneak back within the bullish channel, though traders were split over the ongoing importance of the indicator after yesterday’s breach.
“The whole shift down reset things somewhat and people are searching for new direction,” the trader said.
Many traders don’t expect an end to EU negotiations on the MSR on Monday but said some were buying EUAs in anticipation of positive statements from nations favouring stricter supply curbs.
“I don’t think we’ll get an agreement on Monday but I think people are expecting a positive reaction in the price as we’re due to hear something from the western governments.”
Poland opposes an MSR starting before 2021 and claims the support of seven other countries, enough to block a deal, but at least 14 nations favour an earlier start including France, Germany and the UK.
Meanwhile, German power prices for next-year delivery moved in sympathy with carbon, dropping 35 cents to as low as €31.85/MWh on EEX in the morning before partially recovering to €32.10.
By Ben Garside – firstname.lastname@example.org