Market Development
• Prices close the week at €6.98, a fall of ~3%
• Friday afternoon sell off pushes prices below €7 at the close.
• Fridays auction has lowest cover ratio for the week
• Continuation of subdued trading volume
• EUR weakness leads to 2% rise in EUR denominated coal to weaken the clean dark spread as power prices fall
Auction Overview
• Full week of auctions this week as 15,075mt enters the market.
Price Action
As predicted last week there was another quiet week for the carbon market as the Easter holidays continued to impact on trade volumes and price action. Prices closed down 2.92% at €6.98 on the front December contract. The main price action happened at the very end of the week as a sell off at the close on Friday pushed prices below the €7 level. Earlier in the day the German EU ETS auction cleared with the lowest cover ratio of the week to signal a lack of buying interest in the market. With a trading range of only 36c for the whole week, 16c tighter than the previous two weeks, prices drifted lower without any significant drivers. Power and coal also experienced subdued weeks and the move higher in EUR denominated coal was down to the EUR weakness. EUR coal prices rose 2.21% and coupled with a small fall in the German power price, weakened the clean dark spread and utilities desire to sell power production. Price Impact: with a sell off at the end of the day on Friday there is a bearish sentiment coming into this week, however, without any significant drivers to push prices up or down we may see continued tight trading ranges. MSR developments are now likely to be quiet until May and unless there are significant moves in the clean dark spreads or hedging behavior it is hard to see what drives the EU ETS market significantly in either direction.
Market Stability Reserve (MSR)
No new news to report on the MSR as the market looks forward to May.
Important MSR Dates
• 5th May – trilogue meeting
• 26th May – trilogue meeting
The week ahead
The 30th April compliance deadline is bringing industrial buying interest to market but in relative terms this doesn’t look set to tip the market up significantly. Compliance Period 2 CERs however are in demand for the same deadline and amid thin supply their price has moved up significantly, by nearly 40%. As ever the fuel price moves will be the most likely to produce significant carbon price moves significant price drivers as we write, underlying demand from utilities and industrial participants will likely be key to any movement.
