EU carbon prices fell 1.1% this week as bullish sentiment based on this month’s reduced auction supply faded with so many potential buyers away from their desks.
The Dec-15 EUA contract settled down 6 cents at €7.79 on ICE on Friday after a lacklustre German auction kept bullish traders – and everyone else – quiet, with turnover at under 5 million.
“There’s just a lack of buying with so many people away on holiday. But volumes are low and we’re only a few points down, it’s far from a slump,” said one trader.
This meant the benchmark carbon contract shed 9 cents week-on-week despite briefly hitting a peak of €8.01 on Tuesday. It hit the week’s bottom today at €7.77.
Eyeing a historical trend, analysts had expected carbon to consolidate above the €8 mark this week as auction volume dropped to around half of the year’s average for the month to account for a lower demand over the holiday period.
But prices failed to lift despite good auction bidder numbers, subscription rates higher than the year’s average of 3 and a rare clearing price above market levels on Thursday.
Friday’s sale was the weakest all week, clearing 3 cents below market and with a bid-to-cover ratio of 1.81.
Prices in the secondary market were already on the slide after an early gain and shortly afterwards broke below the €7.80 mark that market watchers had flagged as providing some support.
While auction curbs failed to spur price rises this week, next week’s supply gets tighter still, with just under 6 million spot EUAs on offer compared to 7.5 million across this week.
Meanwhile, German clean dark spreads for 2017 and 2018 spent most of the week below €3, near the year’s lows.
But a $1/tonne drop in coal prices caused spreads to jump by around 30 cents on Friday to return to levels of the previous week, boosting the incentive for utilities to sell electricity forwards and buy the corresponding carbon.
Below are the auctions this week, distance to market, bid-to-cover ratios:
8/3/2015 EU 1,459,000 -€0.01 v market, btc 2.5
8/4/2015 EU 1,459,000 €0.00 v market, btc 4.21
8/5/2015 UK 1,564,500 €0.00 v market, btc 2.63
8/6/2015 EU 1,459,000 +€0.02 v market, btc 4.14
8/7/2015 DE 1,599,000 -€0.03 v market, btc 1.81
By Ben Garside – firstname.lastname@example.org