European carbon prices fell on Wednesday after hitting a three-week high, as technical selling and profit-taking throughout the energy sector weighed.
Front-year EU Allowance futures trading on ICE Futures Europe settled 11 cents lower at €8.11 after sinking as low as €8.06 in the final 20 minutes of trade.
The benchmark contract touched €8.27 early in the session, but failed to break through that mark, which some analysts have identified as technical resistance.
The Dec-15s have tried to penetrate the €8.24-8.27 level seven times since Sep. 15, and traders said the latest unsuccessful attempt contributed to today’s selling.
One market participant said that profit-taking seen across the European energy complex had also helped pull carbon lower.
The front-year EUA futures had risen over five of the past six days, posting a 5% gain between their intraday low of €7.87 of Sep. 29 and today’s peak.
ENERGY
Coal for delivery in Europe next year lost more than 50 cents on ICE, closing at $49.25/tonne after briefly climbing back above $50 for the first time since last September. The forwards had gained almost $2 over the past week since hitting multi-year lows near $48/tonne earlier this month.
Calendar 2016 German baseload power closed at €29.43/MWh on EEX after trading up to €29.75 earlier in the day. That contract has also recovered by roughly €1 since hitting a 12-year trough near €28.50/MWh last week.
Crude oil prices also slid after weekly inventory figures showed US stockpiles were at a record, and this also appeared to lean on the European energy complex.
The German clean dark spreads were boosted by these factors and a stronger euro, rising by between 9% and 12% to their highest levels in several weeks.
This, one trader postulated, would help lift EUA prices tomorrow, with the €8.10 mark acting as technical support early on.
Volume was moderate at 11.5 million units traded on the Dec-15 EUAs, with a further 4.8 million changing hands along the rest of the curve. That included more than 1 million done on each December contract for expiry between 2016 and 2018.
AVIATION AUCTION
Germany on Wednesday sold 781,500 spot EUAAs for €7.97 each, in an auction that attracted bids worth a total 3.7 million units from 14 participants and cleared 22 cents below the front-year EUA futures.
The discount was the smallest since Poland’s March EUAA auction.
Larger-sized auctions return on Thursday when the EU will sell 2.92 million units, potentially meaning more bearish pressure for EUAs.
CERs RISE FURTHER
Meanwhile, CER prices climbed to yet another two-year high, touching €0.66 before slipping back to settle down a cent at €0.61.
At 180,000 credits changing hands, turnover was lighter than recent days.
A further 168,000 units were traded on the Dec-16s, which settled two cents lower at €0.52, maintaining the steep backwardation seen at the front of the futures curve since the end of September.
One trader said the rise may be due to a few companies with remaining Kyoto unit usage quotas buying the credits, which compared to EUAs represent a significantly cheaper compliance option.
Another noted that there remain few sellers in the market, so even light demand could cost the price to climb several cents, while a third market participant said the recent rise, which has seen the front-year futures gain more than 20% since Sep. 29, may also have been fuelled by short-covering.
By Mike Szabo – mike@carbon-pulse.com
