EU Market: EUAs end flat after strong auction as specs line up pre-MSR vote bets

Published 18:00 on June 24, 2015  /  Last updated at 15:06 on May 11, 2016  /  EMEA, EU ETS  /  No Comments

European carbon ended unchanged on Wednesday after a strong UK auction result pushed EUAs up to retest Monday’s six-day high.

European carbon ended unchanged on Wednesday after a strong UK auction result pushed EUAs up to retest Monday’s six-day high.

Front-year EUA futures closed at €7.52 after trading in a narrow 10-cent range on moderate volume of just over 10 million units traded.

Dec-15 prices climbed to a session peak of €7.56 during morning trade, in the hours after the UK government auction for 3.123 million spot units.

The sale cleared 3 cents below market but attracted 18 bidders, the most for a UK auction since early 2014, who placed bids equivalent to 9.7 million units, which was the highest since January.

“We moved up after the auction, but I’m surprised prices have held up considering the state of the clean darks,” one trader said.

Firmer coal prices coupled with a slightly weaker euro shaved a few cents off the calendar-year German clean dark spreads. German baseload power was little changed.

“We are slowly entering the summer season, and it looks like it’s mainly speculators buying these days, looking to ‘buy the rumour’ ahead of next month’s plenary vote on the MSR,” the trader said.

He added that passage of the bill by EU parliamentarians, which is widely expected by the market, in a vote tentatively scheduled for July 6, could then prompt speculators to ‘sell the fact’ and drive prices lower.

“Some traders are trying to make a bit more profit ahead of the summer, so I see a bullish market until July 6, then bearish after that,” he said.

Another trader noted that while bearish fundamental signals were mounting this week, there were few sellers in the market due to industrials, the natural sellers of EUAs, holding on to their inventories, and to lower liquidity stemming from backloading.

Market participants were also cautious following mixed news regarding the fate of Germany’s proposed levy on its oldest coal plants.

For the second time this month, German media reported that the plan, which would force the plants to buy EUAs if they exceed set emissions limits, was being shelved. And also for the second time, the government responded by saying it was still “on the table”.

Meanwhile, notable EUA volume was also transacted elsewhere on the curve on Wednesday, including 2.35 million bought and sold on ICE’s Dec-18 futures and what appeared to be a 2.5 million unit spread trade done between the Jun-15s and Jun-16s.

Additionally, some 578,000 CERs changed hands in one of the busiest days for trade in the UN-backed units this year.

More than half of the volume was done on the Dec-15s, which closed unchanged at 40 cents, and the rest was divided between the daily futures, the Dec-16s and the Dec-19s.

By Mike Szabo – mike@carbon-pulse.com

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