Weekly Market Update N°37: 11-15 September

Last week

On Monday, 11/09, carbon price rose to new highs in early trade when hitting €7.20/t, but fell quickly back below key technical levels at €7.07 and €7.00. The EU auction cleared 5 cents lower than the secondary market at €6.80. Prices fell as low as €6.71 in the afternoon as news emerged that a new amendment concerning the EU ETS and Brexit was put forward last week by four political groups and is thus likely to be adopted in Wednesday’s vote. The EUAs closed the session at €6.8, 21 cents lower than Friday’s close.

On the next day carbon allowances ended almost unchanged from the previous session at €6.87, despite bearish price movements in coal- and power markets. The EUA contracts traded lower in the morning but stabilized before the EU auction, which cleared 6 cents below the secondary market (no particular impact was noticed on the carbon price). The EUAs broke technical support at €6.63 in the afternoon and traded as low as €6.57 (almost 10 % below Monday’s yearly high), before rebounding and recovering all the day’s losses.

On Wednesday, carbon contracts rose back up above €7.00, mainly boosted by gains in the European energy sector. Prices started to increase ahead of the public auction which cleared 4 cents below the secondary market. The bearish auction result did not prevent EUA’s from breaking through technical resistance at both €7.00 and €7.07, reaching a yearly high of €7.22.

European carbon ended down day-on-day after trading most of the session above €7.50 on Thursday. The EUA prices jumped from the opening of the session, supported by the bullish mood from coal- and power markets. The EU auction sold 5.3 million allowances, clearing at €7.42, 8 cents below the secondary market. From there, prices rose another 22 cents to an intraday high of €7.72, the highest level since 8 January 2016. The crazy buying came to a stop in the afternoon hours when profit takers and short sellers entered the market. The EUAs fell relatively more than connected commodities, an impressive 9.3% from the intraday high (this could indicate that the rally was somewhat overdone). The EUAs price closed the day 1 cent below technical support at €7.07.

EUAs then began trading lower around the resistance at €5.83 for the reminder of the session with 8.8 million allowances exchanged on ICE.

Pushed down by falling power prices, it ended the day at €6.95, down €0.12 week-on-week. Some 21.4 million EUAs were traded on the ICE exchange last Friday, nearly twice as much as the last month average. Friday’s EUA auction cleared at €6.96, €0.04 below the secondary market.

 

Key news

Finally progress in the post-2020 reform talks. Among the most important provisions agreed were>

- EU Parliament approved the measure to limit the Brexit effects. If adopted, the provision will allow to automatically cancel EUAs issued or auctioned from January 2018 by a country, which is planning to exit the EU ETS. The measure aims to protect the market from unneeded UK EUAs if Great Britain decides also to leave the scheme. The measure will now go to the EU member states for a discussion and if the Council also agrees, the EU Commission will receive a mandate to make a separate regulation to implement the measure. The director of IETA`s EU policy however expressed fears that the measure could impact negatively the market performance and call on some actions from the UK government clarifying whether the country will stay or leave the EU ETS.

- MEPs decided to extend the suspension of extra-European flights from the EU ETS, which expired at the end of last year, until January 2021, when CORSIA is due to start. The continuation of “Stop the Clock” legislation will to avoid a jump in the prices before 2017 compliance next April in case the obligations of the aviation operators had to submit more than the 10% overall emissions cap they currently represent.

- The lawmakers also reached a conditional agreement that the doubling of the MSR withdrawal rate would last 5 years, in line with the Counsil`s position and not 4 years as initially suggested by the Parliament.

However, some essential issues remained still unsolved, such as the level of the auction share cut and the cut of free EUAs to the industry.

 

Market Data

EUA DEC-17:

Date                      Open    High       Low       Last

11.09.2017          7.11       7.20       6.71       6.88

12.09.2017          6.90       6.90       6.52       6.87

13.09.2017          6.82       7.22       6.78       7.10

14.09.2017          5.41       5.45       5.37       5.43

15.09.2017          7.09       7.11       6.67       6.95

 

 

EUA AUCTIONS:

Date                      Country               Price      Volume               Ratio

11.09.2017          EU                           6.80     5 329 500          2.36

12.09.2017          EU                          6.65       5 239 500          1.91

13.09.2017          PL                           6.95      4 857 000           2.60

14.09.2017          EU                          7.42      5 329 500           2.35

15.09.2017          DE                          6.96      4 473 000           2.86