Weekly Market Update N°39: 2 - 6 October

Last week

On Monday, 02/10, EUA prices lost some ground and came back below the €7.00 level led by lower power prices. The carbon prices dropped in the first minutes of trading and quickly traded close to the €7.00. The solid EUA auction, clearing 3 cents above the secondary market, was not enough to keep prices up and after a short bounce, the prices fell to the intraday low at €6.83. The carbon price came back up and closed the day at €6.94 (a daily loss of €0.13).

The Monday losses were erased on the next day and the EUAs climbed back to €7.00, chasing the upward move in power prices (power prices were supported by unplanned outages at two French nuclear reactors). The carbon markets started the day with a test of the important technical resistance at €7.07, but fell back below €7.00. The intraday high of €7.13 was reached in the afternoon. The market settled at €7.00 that day. Less than 8 million allowances were traded on ICE in a quiet day due to Germany’s public holiday.

On Wednesday, carbon prices fell 10 cents from previous day’s close and settled at €6.90 (in the lower end of the session’s €6.88- 7.05/t trading range). UK’s auction cleared at €6.94/t which was 3 cents lower than the market. Still, EUA prices jumped to its intraday high quickly after the auction and drifted around €7.00 until the last hour of trading when short sellers appeared and prices dropped.

On Thursday, 05/10, carbon allowances  ended flat from previous day’s close in slim trading just below the key technical level at €7.00. The EU auction cleared two cents higher than the EUA Dec-17 contract at €6.92. Coal and German power prices stayed firm with little changes. The market ended the session at €6.89, 1 cent lower than Wednesday’s settlement.

EUA prices moved up on Friday, probably driven by the widening margins in the German power generation sector. The EUA contracts opened Friday at €6.85, moved down to an intra-day low of €6.78 in the morning hours, before edging up steadily to close the day at €7.00 (11 eurocents up from Thursday’s close).  Some 13.2 million EUAs were traded as Dec-17 futures on the ICE exchange last Friday. Friday’s EUA auction (Germany) settled at €6.77, 4 eurocents below the market.

Key news

Preliminary discussions before the next trilogue meeting in an attempt to close ETS reform talks. On Friday, October 6, EU representatives from member states agreed on an updated position for post-2020 reforms, which they hope will help to finalize the discussions during the meeting, scheduled for October 12. The draft proposition made by the rotating EU president Estonia includes an increase in the number of EUAs for power sectors under Article 10c to 60% from 40% following the pressure mainly from coal-dependent Poland, which is the country that will benefit the most if the measure is accepted. To introduce a new measure in the final stage of the negotiations can bring additional difficulties in the talks.  

EU Parliament pushes for more ambitious goals. Last Wednesday, MEPs of the Parliament voted for a set of recommendations for the member states in an effort to prepare a non-binding resolution, ahead of the COP 23 UN meeting, which will take place in Bonn in the period 6-19 November. The current target to reduce the emissions by 40% below 1990 levels by 2030, is not in line with the commitments made under the Paris agreement. All UNFCCC countries should communicate their long-term goals by 2020 and MEPs call for a commitment by EU to prepare a strategy for zero emissions by mid-century.

Market Data

EUA DEC-17:

Date                      Open    High       Low       Last

02.10.2017          7.12       7.12       6.83       6.94

03.10.2017          6.91       7.13       6.88       6.97

04.10.2017          7.02       7.05       6.88       6.90

05.10.2017          6.88       7.00       6.79       6.89

06.10.2017          6.85       7.05       6.77       7.00