EU carbon up 1 percent on hedging, sale delay

Reuters News
Posted: Oct 11, 2012 11:52 AM
EU carbon up 1 percent on hedging, sale delay

LONDON, Oct 11 (Reuters Point Carbon) - European carbon edged up more than 1 percent on Thursday after a sale for nearly half of the 5 million permits expected by the market this week was postponed, spurring utilities to buy allowances.

Front-year EU Allowance futures added 8 cents to 7.80 by 1541 GMT on light volume of 9.2 million units.

"There's a little bit of demand, mainly utility hedging ... (but) carbon's struggling to go in either direction. A lot of people want to short this but others still want to buy it for hedging purposes," one trader said.

"We shouldn't really go up any further considering all the volume coming to market later this year," he said, adding technical resistance between 7.80 and 7.86 euros will keep a lid on prices in the short-term.

The EU and three member states will sell 120 million permits from the 2013-2020 phase of the bloc's Emissions Trading Scheme before January to help power companies hedge forward electricity sales.

Germany on Wednesday postponed the start of its 2013 EUA sales until October 26 to give potential bidders more time get eligibility to participate in the auctions, which had been scheduled to start on Friday.

"Power and coal are down, so if that auction (for 2.4 million EUAs) was taking place tomorrow, (carbon) would be lower today," the trader added.

German 2013 baseload power slipped 0.3 percent to 47.58 euros/MWh while API2 coal for next year delivery briefly dipped below $96/tonne to a three-month low as global supply mounted, coal traders said.

Brent crude oil hit its highest in a month, lifted by escalating tension between Syria and Turkey, maintenance on platforms in the North Sea and a supply crunch in oil products.

In light of the upcoming EUA supply rush, Barclays on Thursday recommended clients short sell EUAs from current levels down to around 6.50 euros, a strategy the investment bank said could net them a return of over 15 percent by mid-November.

Meanwhile, secondary CER prices rose alongside EUAs, with the Dec-12 contract adding 4 cents or 2.3 percent to 1.78 euros on moderate volume of 2.2 million at the time of writing.

A total 4.7 million credits changed hands across all vintages and exchanges.

(Reporting by Michael Szabo)