EU Market: Hope lifts EUAs back to €7 after tumbling on MSR impasse

Published 17:53 on March 25, 2015  /  Last updated at 14:59 on May 11, 2016  /  EMEA, EU ETS  /  No Comments

European carbon prices fell on Wednesday morning as EU officials struggled to reach agreement on the start date for the MSR, but EUAs recovered from their session lows and climbed back to €7 as negotiators pressed on through the afternoon in an effort to forge a deal.

European carbon prices fell on Wednesday morning as EU officials struggled to reach agreement on the start date for the MSR, but EUAs recovered from their session lows and climbed back to €7 as negotiators pressed on through the afternoon in an effort to forge a deal.

The Dec-15 EUA futures, trading on ICE Futures Europe, ended down 8 cents at €7.00 after climbing back from an intraday low of €6.77 touched after news emerged that officials hadn’t made any progress in forging a common MSR position in the morning session of today’s Coreper meeting in Brussels.

“The fall was a bit overblown because the potential for no deal today was not really a surprise,” said one trader, echoing a view held by many in the market that today’s meeting would fail to break the east-west stalemate.

“With the price below €7 it becomes tempting to go long,” he added.

Traders were encouraged by reports that western governments were insisting that a common position be found on Wednesday, but by market close there was no indication that a deal had been struck, threatening to delay agreement on when the MSR should start.

The trader added that while a few weeks’ delay was unlikely to affect market sentiment drastically, EUAs would likely fall further should current EU presidency holder Latvia be unable to broker a deal and that task be passed to Luxembourg, which takes over from July.

Volume on the Dec-15 contract was high, with nearly 25 million units changing hands on ICE.

Meanwhile, ARA coal for delivery next added 35 cents to $57.90/tonne, while UK gas and German power softened.

POLISH AUCTIONS

Poland also held two auctions today, adding a bit of pressure to EUA prices.

The country sold 433,500 EUAAs in the morning in its only aviation allowance auction scheduled for this year.

The sale, hosted by German energy exchange EEX, fetched €6.88 per unit or some 17 cents below the Dec-15 EUA futures at the time bidding ended, marking a significantly smaller discount than seen in previous EUAA auctions.

The auction attracted bids from 11 participants equivalent to a total 1.81 million units, but EEX said the allowances went to just two successful bidders – the fewest ever.

Poland then offloaded 2.854 million EUAs in an afternoon auction that attracted bids worth 6.1 million units from 12 bidders, all of whom were successful.

That auction cleared at €6.77, or 5 cents below the Dec-15 EUA at the time.

By Mike Szabo – mike@carbon-pulse.com

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