EU carbon prices dipped back below €6 on Thursday but technical signals provided just enough support to prevent EUAs from falling to their three-month low hit earlier this week.
The Dec-16s settled down 21 cents at €5.81 on ICE, at the bottom of the day’s €5.81-6.16 range, on modest turnover of 15.7 million. Almost 4 million units changed hands on other vintages.
Today’s intra-day low matched the previous session’s bottom. Prices drifted gradually lower throughout the afternoon but stayed well above Tuesday’s nadir of €5.65.
The settlement leaves the contract just beneath €5.84, the 50% Fibonacci retracement point between this year’s trough and peak, and €5.87, the Dec-16s’ 100-day moving average.
Technical levels have come more into play this week as fundamentals provide little direction.
The energy complex gave a slight bullish signal today, as German clean dark spreads widened amid gains in power prices. The dip in carbon outweighed the effect of a weaker euro and higher coal prices.
Earlier, carbon prices had jumped as much as 9 cents to the day’s peak after the EU’s spot auction cleared at a fairly standard 2 cents below market at €6.04. It attracted bid coverage of 1.66, well below the year’s 2.15 average.
On the policy front, German energy minister Sigmar Gabriel rejected a French proposal for an EU carbon price corridor that French environment minister Segolene Royal is keen to use to push prices up to €30.
At a press conference earlier on Thursday, he said it was necessary to reform the EU ETS and that it made no sense to talk about a carbon tax at the same time.
“I believe the ETS is the better system,” he was reported as saying.
While the remarks appear to be an outright rejection, the reality is more nuanced. Germany is keen on measures that would see EUA prices rise, but favours measures to curb supply rather than more bluntly manipulating the price.
Some observers believe France’s corridor proposal could be an effective compromise by imposing a ‘soft collar’ that sets an auction reserve price under the MSR.
By Ben Garside – firstname.lastname@example.org