(Updates with market close)
European carbon slipped on Monday on the back of the Greek populace’s rejection of the terms of an international bailout offer, but prices held well above last week’s one-month low.
Front-year EU Allowance futures settled down 6 cents at €7.39, having traded as low as €7.34 in the first 10 minutes of the session.
Volume was light with around 6 million units transacted on the benchmark contract.
In a referendum held on Sunday, Greece voted resoundingly 61% to 39% against a deal that would have imposed further austerity measures on the cash-starved country.
The euro fell against the US dollar on the vote result, shedding nearly 1% from above $1.11 to below $1.10 at one point late on Sunday night, before recovering ground to around $1.108 by Monday evening.
The Dec-15 EUAs dropped as low as €7.25 last Monday over worries about Greece, the lowest price seen since June 1.
The country now enters a second week of severe restrictions on bank transactions and widespread uncertainty over its future in the eurozone, having defaulted on an IMF loan last week.
French and German heads of state will meet in Paris later on Monday, ahead of an emergency summit on the crisis by all eurozone leaders on Tuesday, to discuss whether Greece is able to remain in the monetary union.
Analysts last week said a so-called Grexit would inject volatility into the EU carbon market but would have a limited bearish effect on EUA prices in the long-run.
“Lots going on but nothing to give definitive price direction for EU carbon. An eye on FX and another on other countries looking to renegotiate their way out of austerity measures will help determine where we are headed next,” said Redshaw Advisors, adding that Wednesday’s European Parliament vote on the MSR could provide a small boost for prices.
Meanwhile, a 0.8% drop in Cal-16 API2 coal was offset by a drop in German baseload power prices and the softer euro, which left German clean dark spreads little changed on Monday.
The EU’s sale of 2.918 million spot EUAs earlier in the day cleared one cent below market at €7.33 in the first of five sales this week, which will supply a near-maximum auction volume of 15 million units, up from almost 12 million last week.
“If market gets disappointed the (Dec-15 EUA) price could fall back to the local low at €7.18 from May or even to the 200-day moving average at €7.04,” said Bernadett Papp, an analyst with Budapest-based brokers Vertis.
“In a positive scenario, the price has to break the 20-day moving average at €7.51 first before retesting the local June and May highs at €7.64 and €7.75, respectively.”
Technical analysts at energycharts.de were a bit more bullish.
“A clear break above €7.52 would signal a buy, but a daily close below €7.37 would be a sell signal,” they said.
“However, we recognize that prices are recording higher lows, which is a sign of strength. Combined with the long lower shadow candle from (last) Monday, the chances of a breakout to the upside are not bad.”
By Mike Szabo – mike@carbon-pulse.com
