EU Market: EU carbon steady despite bullish auction, power gains

Published 17:38 on October 6, 2015  /  Last updated at 15:20 on May 11, 2016  /  EMEA, EU ETS  /  No Comments

EU carbon ended little changed on Tuesday, shrugging off strong demand for a government auction and higher power prices.

EU carbon ended little changed on Tuesday, shrugging off strong demand for a government auction and higher power prices.

The benchmark Dec-15 EUAs settled 1 cent higher at their session peak of €8.22 on ICE, after trading down to €8.15 earlier in the day. Volume was thin with just under 8 million units traded.

The session’s limits were well within Monday’s €8.06-€8.24 range, when prices came within a cent of last Thursday’s two-week high and settled 6 cents higher.

Market watchers have a bullish outlook for carbon this week, with Thomson Reuters Point Carbon analysts identifying technical signals that could push prices above a resistance level of €8.27, and Redshaw Advisers expecting tighter auction volumes to provide support.

EUA auction supply totals 11.95 million this week, down from 15.08 million last week. Germany will also sell 781,500 EUAAs on Wednesday.

The EU’s sale of 2.9 million spot EUAs cleared a cent above secondary prompt prices when the bidding window closed at 0900 GMT.

The auction had a bid-to-cover ratio of 3.62, the highest for almost two weeks and above the year-to-date average of 3.10. Dec-15 prices rose 3 cents shortly after the sale.

The energy complex also gave a bullish signal for carbon. Front-year German baseload power prices – which have been closely correlated to carbon in recent weeks – rose 36 cents to €29.55/MWh on EEX.

This pushed German clean dark spreads higher, as a stronger euro largely cancelled out a 68-cent rise in ARA coal prices.

Meanwhile, CERs edged up to match Monday’s two-year high, albeit on low turnover.

The Dec-15s rose as high as €0.64 before settling flat at €0.62 on volume of 525,000 units traded.

The Dec-16s saw 350,000 credits change hands before also settling flat at €0.54, maintaining the steep backwardation that has taken over the front of the futures curve.

By Ben Garside – ben@carbon-pulse.com

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