EU Market: EU carbon posts 2.7% weekly gain after govts back early MSR

Published 19:04 on May 1, 2015  /  Last updated at 12:56 on April 25, 2016  /  EMEA, EU ETS  /  No Comments

European carbon prices rose 20 cents week-on-week after hitting a two-month high on Thursday following agreement by EU member states to start the MSR by 2019.

European carbon prices rose 20 cents week-on-week after hitting a two-month high on Thursday following agreement by EU member states to start the MSR by 2019.

The Dec-15 EUA settled up 9 cents at €7.52 on ICE after trading in a narrow range between €7.43 and €7.55, with thin trade of less than 5 million units hampered by a public holiday in much of continental Europe.

Traders said the absence of sellers due to the holiday helped prices rise more easily on low volume, while bullish sentiment lingering following the MSR deal supported.

“Despite the holiday, some utilities still had to buy carbon, especially with reduced auction volumes this week and next,” one trader said.

EU governments are due to auction just over 9 million spot EUAs next week, down from the 11.9 sold this week and well below the 2015 weekly average of 12.65 million.

The benchmark EU carbon contract failed to scale the previous session’s two-month high of €7.64, but has risen steadily since hitting an April nadir of €6.76 mid-month.

Despite both EU governments and the parliament agreeing on most points to strengthen the MSR considerably, carbon is still short of the year’s top trade of €7.90 reached on February 16.

Meanwhile, European coal prices continued to rise on Friday, with the Calendar 2017 and 2018 DES ARA contracts rising 2.2% and 1.7% for the week respectively.

But their effect on German clean dark spreads was offset by a stronger euro, which gained almost 4 cents against the US dollar this week.

Nearer-term German power prices slipped slightly while the Calendar 2018 contract firmed. This lead to some weakness in the 2016 and 2017 dark spreads while the Cal-18s rose.

Implied EUA carry trade annual returns German clean dark spreads
Dec-15 Dec-16 Dec-17 Dec-18 Cal Yr Price Wk chg
Spot 0.861% 0.976% 1.205% 1.480% 2016 €4.32/MWh -0.05
Dec-15 1.064% 1.321% 1.608% 2017 €3.95/MWh -0.04
Dec-16 1.579% 1.895% 2018 €3.53/MWh +0.22
Dec-17 2.202% (based on 36% eff. factor)
(does not include transaction costs)

 

By Mike Szabo – mike@carbon-pulse.com

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