Speculative selling weighed on European carbon prices late in Monday’s session, pushing the front-year futures to settle almost 2% below Friday’s levels.

The Dec-15 contract on ICE Futures Europe ended the day at its intraday low of €7.16 – 16 cents below last week’s end – but Monday’s settlement was pegged slightly higher at €7.19.

Prices had oscillated between €7.30 and €7.40 for most of the day before falling in the final hour of trade. Volume was moderate at around 13 million units.

“It was looking a bit overbought, so we saw a technical retracement,” one trader said, adding that some stop-losses were triggered around €7.25.

The front-year EUA futures’ RSI and MACD indicators were both at two-month highs to start the week, suggesting the contract was due some downside in the absence of bullish news.

Monday’s EU auction also failed to provide any upwards momentum. However, despite attracting the fewest bids in an EU auction so far this year, the sale cleared one cent above market at €7.33.

Traders said interest was lower possibly due to holidays in a handful of EU countries.

The market is now focussing on Wednesday’s Coreper meeting, and whether the EU Council will shift its stance on the MSR’s start date.

Last month EU nations had agreed a common position to back a 2021 start, but sources last week said Latvia had circulated a new proposal suggesting a 2019 start date.

“Any compromise confirming this would be a clear bullish signal,” analysts at Thomson Reuters Point Carbon wrote in a note.

“While we still think it unlikely the entire Council will agree to soften its stance on the start date, if that emerges from the Wednesday meeting then we expect another bullish reaction from the market,” added analysts at Energy Aspects.

Western European governments favour an earlier date while a group of mainly eastern nations led by Poland have formed a blocking minority against any MSR start before 2021.

By Mike Szabo – mike@carbon-pulse.com