EUA Dec18: Vanishing euphoria

2018-02-05 12:49

The EUA Dec18 was not able to stabilize above 9 euro last week, and closed at 8.96 euro (-1.4% w/w).

The EUA Dec18 was not able to stabilize above 9 euro last week, and closed at 8.96 euro (-1.4% w/w). The traded volume on ICE fell by 30% in a weekly comparison.

Mild temperatures, cheap fuels (gas and coal) and high availability of nuclear power plants pushed the price of German power down by more than 4%. Coal fired power plants with a low effectiveness became loss making due to low power prices. All in all, the energy mix was not able to support the carbon market.

Last Monday, the EUA Dec18 opened with a 7 cents gap from previous Friday's settlement level. The price was still able to hit a daily maximum at 9.26 euro in the morning hours, but then it turned sharply lower. It reached its daily minimum already before the auction, and the disappointing result did not help the carbon price in climbing back. The benchmark contract closed the day at 9.00 euro exactly, a loss of 9 cents or 1%. The traded volume of 10.6 million allowances remained significantly below the volumes around 20 million seen last week.

On Tuesday, the EUA Dec18 remained within a relatively tight range during most of the trading session. Since 24 January the intraday range tightened continuously. In the last hours of trading however, sellers pushed the price deeper down. The price settled at 8.88 euro (-12 cents or -1.3%), for the first time below 9 euro since 22 January.

The EUA Dec18 stopped four days of losses on Wednesday. The price opened with a 2 cents gap up in the morning, but fell to a daily minimum at 8.79 euro, just one cent below Tuesday's minimum. The improving German dark spread however attracted buyers who lifted the price to a daily maximum of 9.31 euro. The price closed the session close to the higher edge of the daily range and gained 4.5% in a daily comparison. The traded volume of 17 million allowances was the highest of the week.

On Thursday, the EUA Dec18 opened with a gap up  and rallied quickly to 9.45 euro. In the rest of the morning, the price moved close to this level until it hit a daily maximum at 9.48 euro. In tandem with German power prices, the benchmark carbon contract also turned lower in the afternoon. After reaching a daily minimum at 9.09 euro, the price was able to recover and climbed back to 9.27 euro. This way, the price only lost 1 cent from Wednesday's settlement. As a result, the price formed a doji candle indicating the uncertainty of the market.

On Friday, the price slipped lower and lower until the auction to hit a daily minimum at 8.83 euro (still above the weekly low). The price stabilized than in the afternoon, but still closed at 8.96 euro, a loss of 31 cents or 3.3%.

The fact that the price closed below 9 euro is a negative signal for this week. The abundant auction supply might further weigh on the EUA price and push it towards the 20 and 30DMAs at 8.56 and 8.37 euro, respectively.

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Falguera, Marc - ES
Bujacz, Tomasz - PL
Wilamowski, Bartosz - PL
Verger, Guillaume - FR
José M. García Berrendero - ES, PT
Abajas, Africa - Aviation
Gordziel, Christian - DE
Härmatis, Alexandra - SE, NO, DK

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