European carbon prices climbed back above €8 on Friday afternoon after hitting a three-week low near a key technical support level, but still posted a weekly 1.5% decline.
Front-year EUA futures, trading on ICE Futures Europe, ended the session at €8.01 but settled at €8.00, a cent below Thursday, after dipping to as low as €7.96.
While the day’s trading range was narrow at 9 cents, volume was brisk with 23.8 million units changing hands on the Dec-15s, including 10 million allowances traded EFP.
They appeared to be linked to 11 million units done EFP on the Mar-16s, and were likely related to position rolling by a large utility.
Some 24.9 million allowances were traded along the rest of the curve outside of the Dec-15s, including heavy volumes of 3 million and 3.3 million transacted on the Dec-16s and Dec-17s respectively.
Analysts and traders have identified €7.95 as an important technical support level, and that a break below this could see prices drop down to €7.75 – a level not seen since mid-July.
EUAs edged lower in parallel to German power, European coal and the euro on Friday.
German baseload prices, trading on EEX, lost between 7 and 10 cents, while front-year DES ARA coal on ICE shed 15 cents to $49.70/tonne, falling further beneath the $50 mark.
The euro eased against the dollar, giving back most of the gains posted on Thursday.
Combined, these factors shaved some 2-3% off the German clean dark spreads, pushing them back towards levels seen earlier this week.
Earlier in the day, Germany auctioned 3.2 million spot EUAs in its weekly sale, which cleared at €7.94 or a cent below the secondary market at the time the bidding window closed.
The auction attracted sizeable interest from the 19 bidders, equivalent to 12.9 million units, which was the most since May 7.
This week has seen an average 11.3 million units bid for in each sale, which was also the most since early May.
Next week will see 15.08 million units come to market via government sales, up slightly from this week’s 14.81 million.
Below are this past week’s auction results, featuring the clearing price, distance to front-year EUA futures in the secondary market, and bid-to-cover ratio:
| 21/09/2015 | EU | 2,918,000 | €8.04 | -0.03 | 3.64 |
| 22/09/2015 | EU | 2,198,000 | €7.98 | -0.03 | 3.98 |
| 23/09/2015 | PL | 2,854,000 | €8.04 | -0.04 | 4.14 |
| 24/09/2015 | EU | 2,198,000 | €7.99 | -0.05 | 3.35 |
| 25/09/2015 | DE | 3,198,000 | €7.94 | -0.03 | 4.03 |
And next week’s scheduled sales:
| 28/09/2015 | EU | 2,198,000 |
| 29/09/2015 | EU | 2,198,000 |
| 30/09/2015 | UK | 3,123,000 |
| 01/10/2015 | EU | 2,198,000 |
| 02/10/2015 | DE | 3,198,000 |
| Implied EUA carry trade annual returns | German clean dark spreads | |||||||
| Dec-15 | Dec-16 | Dec-17 | Dec-18 | Cal Yr | Price | Wk chg | ||
| Spot | 1.149% | 1.013% | 1.170% | 1.262% | 2016 | €4.34/MWh | -0.19 | |
| Dec-15 | 1.000% | 1.181% | 1.271% | 2017 | €3.57/MWh | -0.20 | ||
| Dec-16 | 1.361% | 1.417% | 2018 | €3.30/MWh | -0.17 | |||
| Dec-17 | 1.465% | (based on 36% efficiency factor) | ||||||
| (does not include transaction costs) | ||||||||
By Mike Szabo – mike@carbon-pulse.com
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