EU carbon rose slightly due to gains in power prices on Tuesday, recovering from an early dip that extended the previous session’s seven-week low.
Benchmark Dec-15 futures settled up 6 cents at €7.98 on ICE Futures Europe, clawing back from €7.87, which was three cents below Monday’s bottom and the lowest since Aug. 10.
Traders said carbon was closely tracking German power prices in the absence of political developments or low liquidity conditions that could allow speculators to shift prices independently.
“Despite a relative weak carbon auction, power went up and carbon just followed,” one trader said.
He added that because German power was trading near a 12-year low and showing signs of being oversold, both power and carbon could rise this week
Carbon’s correlation with front-year German power prices had strengthened in recent weeks, analysts noted.
Meanwhile, French bank Societe Generale on Tuesday said it had a neutral outlook for carbon.
“Values are well supported at the €7.90 old technical resistance (now support) level,” analysts at the bank said in a note on Tuesday.
“The MSR has exhausted its positive effect on prices as markets start to make sense of initial proposals for post-2020 rules and focus on COP21,” they added, repeating earlier views.
Next-year baseload German power prices gained 7 cents to €28.98/MWh on EEX. European coal prices also rose slightly, clawing back from multi-year lows hit on Monday.
Coupled with a flat euro and firmer carbon, this contributed to a few cents being shaved off each of the calendar-year German clean dark spreads.
The EU’s auction of 2.9 million spot EUAs cleared at €7.87, the same level as prompt prices in the secondary market.
The sale had a bid-to-cover ratio of 2.77, similar to Monday’s 2.54 but below last week’s average of 3.83.
By Ben Garside – firstname.lastname@example.org