European carbon prices were little changed on Friday to end the week down 2.3% as the highest auction supply for a month was only partially offset by supportive profit signals for coal-fired generators.
The Dec-15 EUA contract settled 3 cents lower at €6.88 on ICE after a late rally from the intraday low of €6.82.
Turnover was light at less than 8 million units.
The benchmark carbon contract never returned to the Monday’s open and the week’s peak price of €7.00, but it slowly recovered from the week’s bottom trade of €6.76 on Tuesday.
The market absorbed 15.08 million spot allowances from daily government auctions. Next week’s sale schedule is lighter with only 11.95 million EUAs on offer.
This week’s heftier supply was offset by several market signals that could encourage more carbon buying from utilities.
The euro is at its highest since April 8, making dollar-denominated coal cheaper for European utilities.
German power prices have also edged higher this week, which along with a firmer euro and flat carbon prices has offset pricier coal to plump German dark spreads. (see the table below)
Clean darks for 2017 and 2018 climbed on Friday afternoon to a two-week high, wider profit margins that could tempt utilities to up their forward electricity sales, for which they will need to cover their CO2 output.
The week saw French and German officials speak up in favour of an earlier start to the MSR, countering claims by their Polish counterpart that the EU Council had settled on a 2021 date.
Latvia, chairing the governmental talks, is aiming to bridge that divide to reach a common Council position to resume trilogue negotiations with the Parliament, due on May 5 and 26.
EU sources said Latvia has tabled a fresh proposal that includes putting unallocated allowances directly into the MSR rather than selling them, a move that could appease western governments.
The finished MSR text still needs to be signed off by member states and the full EU Parliament, which has set an indicative voting date of July 6, according to the assembly’s procedure file.
Meanwhile, trades for 164,000 CERs each were done on each of the normally thinly-traded Dec-19 and Dec-20 futures.
ICE’s benchmark Dec-15 CER futures settled a cent lower at 51 cents, but have still gained 28% this month ahead of the end April compliance date for 2014 emissions.
| Implied EUA carry trade annual returns | German clean dark spreads | |||||||
| Dec-15 | Dec-16 | Dec-17 | Dec-18 | Cal Yr | Price | Wk chg | ||
| Spot | 0.887% | 1.043% | 1.298% | 1.560% | 2016 | €4.32/MWh | -0.09 | |
| Dec-15 | 1.163% | 1.443% | 1.708% | 2017 | €3.73/MWh | +0.12 | ||
| Dec-16 | 1.724% | 1.997% | 2018 | €2.75/MWh | +0.42 | |||
| Dec-17 | 2.260% | (based on 36% eff. factor) | ||||||
| (does not include transaction costs) | ||||||||
By Ben Garside and Mike Szabo – ben@carbon-pulse.com
