EU Market: Stronger euro pushes carbon to 2.4% weekly gain for EU carbon prices

Published 16:12 on July 10, 2015  /  Last updated at 15:11 on May 11, 2016  /  EMEA, EU ETS  /  No Comments

European carbon notched a weekly gain of 2.4% as allowance prices were boosted by a stronger euro on Friday, which rose along with wider financial markets after Greece submitted new proposals to tackle its crippling debt.

(updates with closing prices)

European carbon notched a weekly gain of 2.4% as allowance prices were boosted by a stronger euro on Friday, which rose along with wider financial markets after Greece submitted new proposals to tackle its crippling debt.

Front-year EUA futures closed up 14 cents at €7.63, on modest volume of around 8 million units on ICE, with a late surge pushing prices to within a cent of the €7.64 resistance level it has repeatedly run up against over the past month.

The benchmark contract traded in an 14-cent range between €7.49 and €7.63, which was also a two-week high.

Traders said the market had become notably quieter after the European Parliament approved the MSR on Wednesday, adding that the upcoming publication of proposals for post-2020 reform of the EU ETS, as well as the Greek debt crisis, were the only obvious price drivers seen over the next week.

The European Commission due to release its plan to review the ETS Directive on July 15, though what is thought to be a draft of the changes was leaked last week.

The euro gained more than 1% to briefly top $1.12 on Friday after Greece put forward new proposals to cut spending in exchange for a fresh bailout, and following comments from Greek PM Alexis Tsipras saying that his country was not headed for a so-called ‘Grexit’ because he lacked the mandate from voters.

The higher euro cut the cost of dollar-denominated coal for European utilities and, in turn, lifted calendar-year German clean dark spreads by at least 6% each at one point on Friday, pushing them to levels not seen in at least three weeks.

Germany earlier in the day sold 3.2 million spot EUAs for €7.52 each, in an auction that cleared at market and attracted bids worth a total 6.6 million units.

The sale capped a week that saw 15.1 million allowances offloaded by governments.

Auction figures drop to 11.95 million next week, before rising back to 15.1 million the following week.

A total 63.02 million EUAs are to be auctioned in July, the highest monthly total in 2015.

The seven sales held so far this month have attracted an average 16.4 bidders, a tad higher than the 16.3 seen in June but below the average 17.6 in the first six months of the year.

July’s auctions have seen an average 11.3 successful buyers per sale so far, which is also below the mean levels for June (12) and the first half of 2015 (13.3).

Fewer successful buyers coupled with more bidders implies that some participants may be taking a more aggressive approach to the auctions.

Implied EUA carry trade annual returns German clean dark spreads
Dec-15 Dec-16 Dec-17 Dec-18 Cal Yr Price Wk chg
Spot 0.921% 1.000% 1.176% 1.282% 2016 €4.05/MWh -0.02
Dec-15 1.050% 1.239% 1.333% 2017 €3.35/MWh +0.12
Dec-16 1.429% 1.487% 2018 €3.39/MWh +0.21
Dec-17 1.536% (based on 36% efficiency factor)
(does not include transaction costs)

 

By Mike Szabo – mike@carbon-pulse.com

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