EU carbon prices gained slightly on Wednesday to halt a two-day slide and keep alive the prospect of breaking above a €7.64 technical resistance.
The Dec-15 EUA contract settled up 5 cents at €7.50 on ICE, near the middle of the day’s narrow €7.44-7.54 trading range.
Turnover was relatively thin at around 7.5 million units, as the market lacked its usually auction-related activity due today’s regular fortnightly gap in the sales calendar.
Traders said the €7.64 technical ceiling that had been repeatedly tested last week was still a point of focus that if breached could trigger further gains.
Yet, analysts at Socgen said carbon’s broadly upward trend – with front-year prices gaining around 20% since mid-March in anticipation of lawmakers passing the MSR bill – had halted.
“Carbon’s trend up has stalled (temporarily, we think),” said SocGen analysts in a weekly note to clients on European gas and power drivers.
“The MSR has temporarily exhausted its positive effect on prices as markets start looking at post-2020 rules,” they added.
Europe’s climate chief Miguel Arias Canete said this week that the Commission is aiming to publish its post-2020 ETS reform proposal in mid-July despite earlier warnings it could be delayed until September.
The proposal will kickstart a lawmaking process that could last two years. Although the measure is expected to deepen the market’s annual cap reduction from 1.74% to 2.2%, the main focus of the text will be on how industries will keep receiving free allowances rather than major changes to price-driving fundamentals.
Traders said the impetus for an upward move in carbon this week was most likely to come from signs of increased buying appetite from utilities.
“I think everyone is looking to utilities now to provide the buying that could take us above €7.65,” said one trader.
European imported coal prices rose around $0.20 on Wednesday, while German power, UK gas and the euro were little changed, narrowing profit margins for coal-fired generators and damping the prospect they will sell power forward and buy the corresponding carbon.
By Ben Garside – ben@carbon-pulse.com
