European carbon prices hit a three-day high of €7.74 on Tuesday before gradually slipping during an uneventful session a day ahead of an expected endorsement of the MSR by EU member states.
The Dec-15 futures ended down 3 cents at €7.63 on ICE after trading in a €7.61-74 range amid fairly thin volume of around 11 million units.
The benchmark carbon contract has been in a broad upward trend over the past month, gaining some 13% since Apr. 12’s nadir of €6.76, as lawmakers put together a deal on the MSR.
Traders said they expected few further short-term gains as the measure is formalised into law over the coming weeks, but they were divided on whether current price levels could be sustained.
“Looks like there is a gap between the sellers and buyers. Some expecting a lower price around €7.00-7.20, others targeting €7.90-8.00,” one said.
“I think the Coreper meeting tomorrow is already priced in,” he said, referring to a meeting of member state officials expected to endorse the MSR deal before the measure heads to Parliament for confirmation votes in early July.
Analysts and traders expect a smooth passage for the remainder of the MSR lawmaking process, though it is still possible for the measure to be delayed or rejected by governments should Poland manage to resurrect enough support to form a blocking minority.
Poland lost the required level of support to thwart an earlier MSR start than 2021 after the Czech Republic and Lithuania were swayed by a concession to safeguard auction revenue for poorer EU states.
An association of Polish public utilities has cautioned against agreeing the current MSR deal without further scrutiny but the Czech Republic’s biggest utility CEZ today signalled its firm support.
In its quarterly results, the company said last week’s MSR deal “gives (it) some hope that the entire (ETS) system will work once again.”
Meanwhile, the energy complex provided a slight bearish signal for utilities to buy carbon as next-year German power prices fell 20 cents to €31.60/MWh on EEX, while fossil fuel prices were little changed.
By Ben Garside – ben@carbon-pulse.com
