French investment bank Societe Generale expects EU carbon prices to rise 10.5% from current levels by the end of the year, maintaining its previous forecast despite predicting a slowdown in both volatility and turnover in the coming months.

“The market is catching its breath after a rollercoaster over the past couple of years,” the bank’s analysts said in research note published after market close on Wednesday.

SocGen kept the forecasts it made in March, that EUA futures will end the year at €8.32 or some 79 cents above today’s ICE settlement of €7.53.

They added that prices will average €8.49 in 2016 and €9.64 in 2020, when the supply-curbing MSR is due to take effect.

The analysts said it should be clear by now that the European Commission “means business as far as ‘fixing’ the EU ETS is concerned”.

“We see prices increasing on the back of strong and concrete political will behind structural reforms,” they added.

Despite this, SocGen said the market was likely to be much calmer with lower turnover than in recent months.

“EUA prices have settled into a type of price behaviour characterised by extended periods of low volatility … prices look set to remain ‘stuck’ unless the resistance at €7.65 is cleared sustainably.”

The bank advised their clients not to expect a “fast ride up” and to buy on price dips.

By Ben Garside – ben@carbon-pulse.com