EU Market: EUAs extend 2-week high amid auction gap

Published 18:09 on June 3, 2015  /  Last updated at 15:03 on May 11, 2016  /  EMEA, EU ETS  /  Comments Off on EU Market: EUAs extend 2-week high amid auction gap

EU carbon prices rose slightly on Wednesday to extend a two-week high amid a two-session auction pause and improved profitability for big-emitting utilities.

EU carbon prices rose slightly on Wednesday to extend a two-week high amid a two-session auction pause and improved profitability for big-emitting utilities.

The Dec-15 EUA contract settled up 4 cents at €7.52 on ICE, near the middle of the day’s narrow €7.45-7.58 trading range, on fairly thin turnover of around 10.5 million.

This extended Tuesday’s 20-cent increase, which came as speculators anticipated prices would rise while no government auctions are held until Friday.

Improved profit margins for coal-fired generators also made it more likely speculators will buy EUAs.

German clean dark spreads for calendar 2017 and 2018 widened further on Wednesday to near their highest levels in six months, mainly due to weaker dollar-denominated coal prices exacerbated by a stronger euro.

Wider spreads make it more attractive for coal-fired power generators to sell their electricity forwards, which they will cover with the equivalent carbon allowances to lock in profit.

Trading is likely to be quiet over the next two sessions due to a Thursday public holiday in Germany, with many traders opting to take Friday off to bridge into a long weekend.

This may test demand at Friday’s German auction of 3.2 million spot EUAs, with auction supply hitting a near-maximum of 15 million next week.

By Ben Garside – ben@carbon-pulse.com