EU Market: EUAs drop 2% as bearish signals build

Published 18:16 on May 26, 2015  /  Last updated at 15:06 on May 11, 2016  /  EMEA, EU ETS  /  No Comments

European carbon prices dropped on Tuesday and closed below an upward sloping trading channel that was established in March - a bearish technical signal suggesting further losses could be in store.

European carbon prices dropped on Tuesday and closed below an upward sloping trading channel that was established in March – a bearish technical signal suggesting further losses could be in store.

Front-year EUAs settled at €7.26, down 13 cents or around 2% and a cent off the day’s low, with volume light at 8.2 million.

Prices were flat for most of the day, but started to slip after 1400 GMT following the European Parliament’s environment committee approving the MSR text – suggesting that some speculators may have taken a “buy the rumour, sell the fact” mentality.

The close was the benchmark EUA contract’s lowest since Apr. 27, and pushed the futures outside of the roughly 60-cent trading channel in which they have remained since hitting their 2015 low of €6.28 on Mar. 13.

Traders said that following the MSR’s approval and with German clean dark spreads falling by some 10% over the past week, there appeared to be fewer reasons to buy carbon as the market approaches its annual summer lull.

“While we expect EUA prices to drift gradually upwards eventually, we still think this week could struggle with much upside,” said analysts at Energy Aspects.

The Dec-15s may now test their 50-day and 100-day moving averages, currently valued at around €7.21 and €7.16 respectively.

The contracts RSI and MACD indicators were also at their lowest levels in more than month, echoing the steady increase of bearish sentiment in the market.

Tuesday’s EUA slide also contrasted with firmer German baseload power prices, which gained as much as 0.5%.

“With cooler May temperatures likely to be less supportive of power demand than hotter May temperatures, the demand side could well be quiet over the coming week,” Energy Aspects added.

Tuesday’s muted EUA volume was also due to some market participants being away from their desks, attending the Carbon Expo conference in Barcelona.

The EU earlier on Tuesday auction 2.918 million spot EUAs for €7.28 each.

The sale cleared 2 cents below market, and attracted bids equivalent to a total 8.2 million units.

By Mike Szabo – mike@carbon-pulse.com