EU Market: EUAs steady as utility buying capped by spec selling

Published 17:22 on March 24, 2015  /  Last updated at 14:59 on May 11, 2016  /  EMEA, EU ETS  /  No Comments

European carbon prices were steady on Tuesday afternoon after hitting a one month-high earlier, as gains fuelled by healthier dark spreads were capped by selling ahead of tomorrow’s EU meeting over the MSR.

European carbon prices were steady on Tuesday afternoon after hitting a one month-high earlier, as gains fuelled by healthier dark spreads were capped by selling ahead of tomorrow’s EU meeting over the MSR.

Front-year EUAs closed down 2 cents at €7.07, off their intraday high of €7.25, which was the loftiest level seen since Feb. 26.

Volume was moderate at around 18.5 million units traded on the contract.

“Dark spreads are very good, but there’s some squaring of positions ahead of tomorrow’s meeting,” one trader said.

“Quite a bit of length that’s come in over the past few sessions is coming out.”

The Dec-15 contract has gained around 5.5% over the past three sessions, spurred mainly by falling coal prices and firmer power rates.

German calendar 2018 clean dark spreads were trading around €2.65/MWh on Tuesday, after languishing below €2 for much of the past few months.

European member state officials will reconvene on Wednesday to discuss the latest MSR proposal tabled by EU presidency-holder Latvia, and on the off chance that they are able to agree a common position, it is unlikely to be compatible with the view of the European Parliament.

That will lead to trilogue talks between the two institutions and the European Commission, which are due to kick off on Mar. 30.

“If nothing is agreed tomorrow, EUAs could come off through the rest of the week,” the trader said.

This would be expedited if a weaker euro causes German dark spreads to recede, he added.

“If the darks stay strong, it’ll help support carbon. But otherwise the whole thing will collapse again,” he said, alluding to an EUA price drop
between Mar. 12-13 that saw the benchmark contract plumb a 2015 low of €6.28.

EUAs briefly surged earlier after the EU’s sale of 2.9 million spot allowances cleared at €7.02 on EEX, a cent above market.

EUA sales typically clear below market, but strong interest has helped the past six auctions clear between 1 and 3 cents above market, which has also pushed up prices in the secondary market.

By Mike Szabo – mike@carbon-pulse.com

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