European carbon prices trickled lower on Thursday in very light volumes that squeezed the benchmark contract’s intraday trading range, as concern mounted over evaporating activity in the market.
Front-year EUA futures, trading on ICE Futures Europe, shed 2 cents to settle at €7.48 – near the bottom of the day’s €7.47-7.53 range.
Turnover on the Dec-15s was low at around 4.35 million units traded, with a further 1.57 million tonnes changing hands along the rest of the futures curve.
“Volume was disappointing, volatility non-existent,” said Louis Redshaw of Redshaw Advisors.
“While it might be a specific outcome of today, there is an element of concern that liquidity is falling, and this is an unwelcome development in the world’s largest and most sophisticated carbon market,” he added.
“Hopefully the decline in volumes won’t continue and potentially lead to a less efficient market going forward.”
Daily trading volumes have declined steadily since lawmakers agreed in early May the details of the MSR, and as utilities reduce their appetite for EUAs for a variety of reasons.
The Dec-15 futures remained above their 50-day simple moving average (€7.38) and middle Bollinger band (€7.44) on Thursday, and within reaching distance of a €7.64 technical resistance level that has bedevilled the market over the past two weeks.
The contract’s Relative Strength Index (RSI) also closed at 53.6 – just above the 50-mark that divides upward and downward momentum signal ranges.
Earlier on Thursday, the EU’s sale of 2.9 million EUAs cleared at €7.45, in line with the secondary spot market, with a bid-to-cover ratio of 2.06, which was the lowest in an EEX-hosted auction since Apr. 30.
Germany will sell a further 3.2 million units on Friday, before auction volumes ramp up to a total 15.1 million allowances next week.
Meanwhile, European coal prices continued to edge higher with the Calendar 2016 DES ARA contract adding 34 cents to a near two-month high of $58.75/tonne.
However, a weaker US dollar and the dip in EUA prices offset the effect of dearer coal on German clean dark spreads, helping to push profit margins for coal-fired power plants slightly higher, according to Carbon Pulse calculations.
By Mike Szabo – firstname.lastname@example.org