Weekly Market Update: 26-30 June

Last week

The EUA contracts eased on Monday 26/06 and broke out of the existing trading range. Prices dropped below 4.85 EUR (not seen since 24 May). The prices fell despite a strong EUA auction clearing at the secondary market price. The carbon market closed the day at 4.78 EUR.

On the next day, EUAs came back up towards the 5.00 EUR line. The carbon contracts started moving up after the EUA auction showed solid bid to cover ratio of 3.36 (well above average so far this year of 2.62). At the end of the trading session the price was supported by a rise of oil prices and hit the intraday high at 4.99 EUR. The day closed at 4.94 EUR (up by 16 cents day on day).

On Wednesday, 28/06, carbon stayed almost flat, following Tuesday's gains. The EUA contracts closed at 4.94 EUR (same level as the previous close). All transactions were made in a narrow range between 4.88 and 4.98 EUR.

On the next day, 29/06, carbon prices rallied. The EUA contracts broke above the technical resistance level at 5.00 EUR and closed at 5.07 EUR. That was the first close above 5.00 EUR since June 5th. Trading opened at 4.98 EUR, quickly breached the 5.00 EUR line, before calming down in a range between 5.06 and 5.11 EUR. Some 14.3 million allowances were traded in the secondary market, the highest volume since 23/05.

On the last day of the week, carbon contracts held steady in the range between 5.00 and 5.10 EUR. The German auction cleared at 5.02 EUR (6 cents lower than the secondary market) with a lower-than-average cover ratio of 2.14. The wider energy complex was mixed with stronger coal prices supported by a firmer euro. The EUA contracts closed the week at 5.03 EUR.

Key news

Estonia takes over the presidency of EU. Malta handed the rotating presidency to Estonia and now all the hopes for a deal to be struck in relation to the next phase of the trilogue negotiations of the EU Commission, the Parliament and the Council, lie with Estonia. The main negotiators were not able to achieve an agreement after a four-hour closed-door meeting at the end of June. The discussions are not expected to finalise before the summer break in August, observers are however optimistic and believe that the negotiations will continue smoothly and hopefully will finish with a deal before the end of the year.

The world has three years to prevent dangerous climate change, says an article in the journal Nature. The experts warn that if no actions are soon taken to make significant reductions in CO2 emissions, the planet will face significant natural catastrophes. We are already witnessing summer sea ice disappearing in the Arctic, coral reefs dying from heat and such others. In case the current levels of emissions continue beyond 2020, the target put in the Paris agreement of 1.5-2 degrees will be unachievable. Since 1880s, the world’s temperature has risen by around 1C because of the human activity resulting in CO2 emissions.

Market Data

EUA DEC-17:

Date                      Open     High       Low       Last

26.06.2017          4.87        4.89       4.77       4.78

27.06.2017          4.84        4.99       4.80       4.94

28.06.2017          4.94        4.98       4.88       4.94

29.06.2017          4.98        5.14       4.98       5.07

30.06.2017          5.09        5.12       5.01       5.03

EUA AUCTIONS:

Date                      Country               Price      Volume                Ratio

26.06.2017          EU                         4.84      4 261 500          2.74

27.06.2017          EU                          4.80       4 261 500            3.36

28.06.2017          UK                          4.92       4 269 500            1.93

29.06.2017          EU                          5.05       4 261 500            2.95

30.06.2017          DE                          5.02       4 473 000            2.14