EU carbon prices rose to an eight-day high on Thursday, lifted by stronger German power and speculative EUA buying ahead of next month’s European Parliament vote on the MSR.
Front-year EUA futures settled 10 cents higher at €7.61, with volume light at 8.6 million units traded.
The bellwether units traded in a narrow range between €7.52 and €7.62 on ICE Futures Europe.
“Power’s up, probably due to options expiring today, and that’s pulling coal and carbon higher,” one trader said.
German calendar-year baseload forwards, trading on EEX, gained at least 25 cents/MWh or 0.8% each.
“German wind power (output) is weak but solar PV is strong, so we’ll see if power can hold these gains tomorrow, or if this was a purely speculative move to squeeze option players,” the trader added.
European coal prices continued their own march upwards, with front-year Cal-16 forwards adding 50 cents to $60.20/tonne on ICE Futures Europe.
DES ARA calendar-year paper has gained between 5% and 8% from their 2015 lows, as beleaguered producers hold on to inventories in the hope of pressuring prices higher.
But also faced with a stronger euro, firmer coal failed to dent German dark spreads on Thursday, which edged higher on the back of power prices.
The gain in EUAs also came despite a weak auction result earlier in the day.
A group of around 25 EU nations sold 2.918 million spot units for €7.52 each, a 4-cent discount to market prices at 0900 GMT.
The sale attracted bids for 4.7 million allowances – the lowest for an EEX-hosted EUA auction so far this year. Just 13 bidders participated, which was the fewest since Poland’s end-March auction.
The Dec-15 EUAs remain wedged inside a ‘pennant’ technical formation, with the upper band aligned with resistance levels near €7.64, above which prices were unable to climb during multiple attempts over the past fortnight.
Traders said speculative longs, placing bets ahead of the July 6 MSR vote but wary of the imminent start to the annual summer lull, may be targeting levels above €7.64 but are likely to take profits should prices fail to break through during their next round of attempts.
The pennant’s lower band is pegged around €7.43, near the contract’s 23.6% Fibonacci retracement level (€7.40) and the contract’s recent low (€7.42), and it has provided steady support during recent periods of mild corrections.
Meanwhile, some 146,000 CERs traded on ICE’s Dec-15 contract, with another 25,000 transacted on the daily futures. The contracts settled at 39 cents and 40 cents respectively.
By Mike Szabo – mike@carbon-pulse.com
