EU carbon lacks direction amid low volumes

Reuters News
Posted: Feb 29, 2012 4:33 AM
EU carbon lacks direction amid low volumes

By Thomson Reuters Point Carbon

LONDON, Feb 29 - EUAs were stable on Wednesday morning amid thin volumes as the market waited for fresh direction following a day of big price swings on Tuesday, when prices hit a 10-week high.

By 0900 GMT, the ICE ECX December 2012 EU Allowance contract was pegged at 9.04 euros, down 2 cents on Tuesday's settlement.

The bellwether contract opened at 9.00 euros, falling to a low of 8.88 euros in the first two hours of the session when less than 1 million December 2012 EUAs were traded.

"There are pretty mixed signals today as gas and power, which had been supportive of carbon, are lower. But the euro is up against the dollar (which makes for oil and coal cheaper in Europe)."

"After yesterday's volatility maybe carbon is taking a breather," the trader added.

Carbon prices moved in a 75 cent range on Tuesday, hitting a 10-week high of 9.63 euros after news that the EU Parliament's industry committee voted in favor of a measure to withdraw an unspecified number of EUAs in the 2013-2020 trading period.

However the market later gave up many of those gains, closing at 9.02 euros on Tuesday.

Traders said yesterday afternoon's price rise fall was expected as the bullish news had already been priced into the market.

"The facts are still the same and today the market is still over-supplied. It will be a long time before we see any permits removed and we still do not have an amount (specified) so there is no reason to be bullish" a second trader said.

The 2013 baseload German power contract traded at 53.23 euros/MWh on EEX, down 15 cents on Tuesday's close, while the UK summer 2012 gas contract slipped 25 cents to 60.5 pence/therm.

Meanwhile the euro nudged up 0.1 percent to $1.347, close to a 2.5-year high against the dollar amid hopes that the European Central Bank will pump up a further 500 billion euros into the financial systems to help prop up euro zone banks.

"It is not clear what carbon will follow and I would expect prices to remain around 9 euros today," the first trader said.

In the secondary market for U.N.-backed carbon credits, the December 2012 CER contract traded at 4.79 euros, down 1.8 percent from the previous day's close.

(Reporting By Susanna Twidale)