Market Development
- EUA carbon price closes the week at €8.41, down 23c week-on-week
- Low of €8.35 set on Friday
- Large falls in the clean dark spreads
- Mild and windy weather reduces demand
- EUR/USD rate falls 2.6% on prospect of interest rate rise in US
- Environmental Finance Annual Market Rankings now open
Auction Overview
- 075Mt comes to market this week in five EUA auctions (up from 11.952Mt from last week)
- 828Mt EUA will come to market in in total in November
EUA Price Action
As we hinted at last week, carbon price rises were stopped in their tracks with a weekly price fall of 23c to end the week at €8.41. The 2.66% fall was mostly driven by declining clean dark spread (CDS) levels as falling power prices and the strong USD pushed the calendar 16 & 17 CDS to their lowest levels since early August. The slashes to Energy Aspects’ price forecast will not have helped the confidence of any longs out there. The calendar 18 CDS fell even further to close the week ~20% lower. CDS falls were caused by: Euro weakness (2.6% loss against the USD) - stronger than expected jobs data in the US (which increases the likelihood of a rates rise in the near future) and Power weakness - The current mild and windy weather led to power price falls. The low of the week being set on Friday afternoon provides some bearish momentum as we come into this week, a full week of auctions. In summary the demand side fundamentals for carbon emissions trading do not look strong. Price Impact: with prices having failed to consolidate or advance last week, when the auctions were 3Mt lower, all things being equal there should be more of the same to come. The mild and windy weather is set to continue during November (strongest El Nino ever recorded is having this knock-on impact).
Last chance to vote – Environmental Finance Annual Market Rankings close on 13th November
The Environmental Finance Annual Market Rankings close on Friday and we are hoping to repeat last year’s success. If you value the service that we provide we welcome your support in the following categories;
EU EMISSIONS TRADING SYSTEM
- Best trading company, spot & futures
- Best advisory/consultancy
KYOTO PROJECT CREDITS (JI and CDM)
- Best trading company, secondary market
- Best advisory/consultancy
To vote, please click here. It will require only a few minutes of your time.
The week ahead
It remains to be seen whether the falls last week were a small downward correction in the continued grind higher or the prelude to larger bearish moves. The former currently seems the most likely given the levels of EUAs taken out of the market by backloading this year and next however, as we suggested earlier, further short term bearish moves this week are more likely than not as auction levels return to the 15Mt mark and the mild weather continues.
