EU Market: EUAs flirt with €7 after MSR comments, bullish auction

Published 10:28 on April 16, 2015  /  Last updated at 12:54 on April 25, 2016  /  EMEA, EU ETS  /  No Comments

EU carbon prices rose back to near €7 on Thursday, spurred by a bullish auction and comments by a French official that suggested the bloc's member states had yet to agree on the MSR’s start date.

EU carbon prices rose back to near €7 on Thursday, spurred by a bullish auction and comments by a French official that suggested the bloc’s member states had yet to agree on the MSR’s start date.

The front-year contract trading on ICE Futures Europe hit an intraday high of €6.97 before sinking back to end the day at €6.90, up 1 cent on Wednesday’s settlement. Volume was light at around 6.4 million units traded.

Prices gained in the morning following the EU’s allowance auction, which cleared above market and featured a mean bid price that was above the sale price.

They then rose further after France’s deputy permanent representative to the EU in Brussels Alexis Dutertre said on Twitter that the EU ETS needed the MSR sooner than 2021 – the date agreed by EU Council last month – to predictably regulate surplus allowances.

“Negotiations are not finished!” he said, countering statements made earlier this week by Polish climate envoy Marcin Korolec.

Guido Knoche, an official working on climate issues for Germany’s environment ministry, also tweeted: “Starting in 2021 undermines one of core MSR purposes quite strongly and wouldn’t be good news for the EU ETS.”

In today’s EUA auction, the EU sold 2.918 million spot EUAs for €6.82 each, 2 cents below the price of the Dec-15 futures on ICE at the time the auction’s bidding window closed.

Spot EUAs are currently priced at a 4-cent discount to the front-year futures, and auctions held in the first three days of this week have cleared between 1 and 3 cents below market.

According to sale hosts EEX, today’s EU auction’s mean bid was €6.83 and attracted a higher-than-usual 22 bidders, but they submitted bids worth a total 5.48 million units, equating to an oversubscription rate of just 1.88 – the lowest level for an EU auction so far this year.

Those factors suggest that more bidders were after smaller amounts, perhaps for compliance buyers seeking to top-up ahead of the Apr. 30 EU ETS deadline to hand in allowances.

Some traders echoed this, saying that light compliance buying had recently replaced activity by speculators, many of whom have taken to the sidelines until talks between EU member states and lawmakers on the MSR resume next month.

Meanwhile, European coal prices continued to recover from a nine-year low hit earlier this month, bolstered by a stronger Russian currency.

Europe imports most of its coal from Russia, Colombia and the US, and traders said a higher rouble will likely translate into higher coal prices.

The rise in coal prices overshadowed small gains made by the euro and German power prices to squeeze the German dark spreads, which are nearing their lowest levels since March.

By Mike Szabo – mike@carbon-pulse.com

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