EU carbon prices fell on Monday after failing to break through a strong technical resistance level that some observers had flagged as a key near-term price driver.
The Dec-15 EUA ended down 9 cents at €7.55 on thin turnover of less than 7 million units on ICE, giving up almost half of last week’s 20-cent gain.
The benchmark carbon contract opened at the €7.64 level that the market had repeatedly tested last week, and a resistance level increasingly seen by participants as a signal of where prices could go over the next few weeks.
“A failure to breach the resistance could lead to some selling pressure down towards €7.20, where it should find some support,” wrote traders Redshaw Advisors in a note to clients.
Analysts at Thomson Reuters Point Carbon expect prices to consolidate this week between €7.53-7.64 this week, an even narrower range than last week’s €7.43-7.64, as the two-week bull-run from €7.18 runs up against the 2015-high psychological ceiling of €7.90 reached on Feb. 16.
“Narrowing clean dark spread and shaky macro sentiment due to the Greek debt talks might post some downside risks to carbon,” they added in an email.
Talks between Greece and its creditors broke down again on Sunday, bringing the crisis-ridden nation closer to a default by the end of the month that could push it out of the euro zone.
The resulting weaker euro combined with a $0.20 rise in European coal import prices on Monday hurt profitability for German coal-fired power generators, denting their incentive to sell electricity forwards and buy the resulting carbon.
The Cal-2017 German clean dark spread lost around 3%, extending its 10% drop last week, while the Cal-18 was flat.
The EU’s sale of 2.9 million spot units cleared two cents below market at €7.54 but was 3.49 times oversubscribed – the most in two weeks.
Auction volume dips from 15 million to 11 million this week, with sales on every day except Wednesday, before hitting 15 million again next week.
Redshaw Advisors suggested that this week’s lower volume could mean the market only required a continuation of last week’s underlying demand to breach the €7.64 level and establish a new, higher trading range.
Earlier in the session, Europe’s climate chief Miguel Arias Canete insisted the European Commission was working hard to publish its post-2020 ETS reform proposal before the August break, keeping alive the possibility of bullish political developments before the summer trading lull despite two earlier warnings that it may only be ready in September.
By Ben Garside -ben@carbon-pulse.com
