EU carbon was little changed on Monday as analysts predicted a slowing of the gains that have pushed prices gradually higher over the past month.
The Dec-15 EUA contract settled 1 cent higher at €7.63 on ICE, at the upper end of the day’s €7.55-67 trading range amid light turnover of around 7 million units.
“We expect a week of consolidation following carbon’s consecutive gains for the past four weeks,” said analysts at Thomson Reuters Point Carbon, in a note.
They pegged resistance at €7.75 and expected this week’s higher auction volume to counteract any positive impact from a recent improvement in the profitability of coal-fired power plants.
Some 14.8 million spot EUAs will be sold across the five auctions this week, higher than the 12.1 million sold last week.
The benchmark carbon contract has gained 13% or 87 cents trough-to-peak since April 14 as lawmakers have passed various stages of the MSR.
But prices are likely to be stable this week with most of the procedural hurdles cleared and the political agenda empty of EU ETS-related elements, said Bernadette Papp at brokers Vertis said in a weekly blog post.
But she warned that “some correction might be in the cards” as bearish pressure is applied from the week’s higher auction supply and a relative strength index approaching the 70 level that suggests the Dec-15 is overbought.
Redshaw Advisors agreed that there were few price drivers on the immediate horizon but had a more positive price outlook.
“The sentiment in the market is positive and with each step the MSR passes to becoming law it strengthens,” they said in a note to clients, adding that long term forecasts were keeping supply tight.
“There is little incentive for industrials to come out and sell allowances as price forecasts suggest ever increasing prices.”
By Ben Garside – firstname.lastname@example.org