EU Market: EU carbon falls below €8 amid weaker energy, euro

Published 16:28 on September 21, 2015  /  Last updated at 15:18 on May 11, 2016  /  EMEA, EU ETS  /  No Comments

European carbon prices continued to slide on Monday, slipping to a two-week low below €8 in range-bound trade amid a softer energy complex and weaker euro.

(Updates with market close)

European carbon prices continued to slide on Monday, slipping to a two-week low below €8 in range-bound trade amid a softer energy complex and weaker euro.

The front-year EU Allowance futures, trading on ICE Futures Europe, settled down 13 cents at €7.99 after dipping to as low as €7.98 just before market close.

Volume was moderate with around 11.2 million units changing hands.

The bellwether contract has now fallen for five of the past seven sessions, losing more than 4% since hitting a September high of €8.35 on Sep. 10, which was 8 cents shy of the year’s peak touched on Aug. 20.

“The Dec-15 contract is likely to driven by the developments in German year-ahead power prices, which have plunged to fresh 12-year low this morning,” said analysts at Thomson Reuters Point Carbon.

The Calendar 2016 baseload contract, trading on EEX, shed 13 cents to €29.45, while the further out forwards posted similar losses to hit new multi-year lows.

UK gas and DES ARA coal were also lower, as was the euro versus the dollar.

As a result, the Cal-16 German clean darks lost more than 5% on Monday, extending last week’s 5% drop and falling further away from recent multi-month highs near €4.80/MWh (for plants with a 36% efficiency factor).

“With the clean dark spreads and the Euro sliding, a close eye will need to be kept on these levels to ensure the demand side is able to cope with the volume. A break through €8.00 may lead to further, limited, losses,” said Redshaw Advisors.

TECHNICAL SUPPORT

The benchmark EUA futures had held above their 50-day moving average (DMA) through most of Monday, before dropping below it and approaching €8 – a technical and psychological support level for the market.

“After (€8), a local low at €7.95 and the August low at €7.76” would be the next support levels to look out for, according to Bernadett Papp, an analyst at Budapest-based Vertis.

“In a positive scenario, the 30- and 20-DMAs have to be retested at €8.19 and €8.17, before climbing back to last week’s high at €8.29.”

Analysts at Energy Aspects said they expect prices to trade in the €8.00-8.50 range for the coming week, although prices could be test the downside given another week of high auction volumes.

“Overall, we expect another week of prices trading in the lower half of the current range.”

The EU’s sale of 2.198 million spot EUAs on Monday cleared at market with a bid-to-cover ratio of 3.64, higher than all but one of last week’s government sales.

Governments are due to sell a total 14.81 million allowances this week, followed by 15.08 million next week.

“A more supportive driver comes from the results of the latest Greek election, which makes acceptance of the latest austerity/bailout package more likely. This removes some residual risk from the market and could provide some price support,” Energy Aspects added.

Greece’s left-wing Syriza party was re-elected in Sunday’s ballot. Syriza’s leader Alexis Tsipras was first elected Prime Minister earlier this year on an anti-austerity mandate, but he and his party were this summer forced to accept tough new measures in order to receive the country’s third bailout.

By Mike Szabo – mike@carbon-pulse.com

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