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EU CO₂ prices rally as August supply curbs begin

Increase font size  Decrease font size Date:2019-08-07   Views:71
EU carbon dioxide allowance prices rallied in the week ending August 2, taking support from the start of August's reduced-volume auctions.

EU Allowance futures contracts for December 2019 delivery on the ICE Futures Europe exchange rallied more than a euro to close at Eur29.45/mt Thursday, and moved in a range of Eur28.93/mt to Eur29.46/mt Friday.
That compares with Eur28.29/mt at the close a week ago, on July 26.

The sharp rebound in prices came as August's reduced-volume auctions began Thursday. August is historically a bullish month for carbon prices, as governments cut back the volume sold during the peak summer holiday season.

August will see primary supply slashed by 56% to 29.2 million mt, from 67.1 million mt in July, according to European Energy Exchange data.

Natural gas prices also saw gains in the second half of the week, providing a bullish factor for carbon.

Carbon prices also took notional support from unusually low wind power availability in the week ending August 2, with levels fallingto their lowest so far this year.

Across Europe as whole, wind power fell to as low as 4.5% of electricity demand Thursday, compared with 6-10% of demand the previousweek, according to Wind Europe.

Other things being equal, low wind increases the need for marginal coal and gas-fired units to meet grid demand, raising CO₂ emissions from power generation.

Wind levels were set to stay low in the short-term, with combined wind in Germany, UK, France, Spain and Italy forecast at just 6.8 GW for Monday, according to Spotrenewables.com , although wind was set to rebound as high as 25 GW by Thursday in those five countries.

December 2019 EUA futures prices eased back slightly Friday to trade at Eur29.20/mt by mid-afternoon, down from Eur29.45/mt at the close Thursday.

Looking ahead to Week 32, total primary EUA supply from auctions is set to fall to just 5.8 million mt from four auctions - the first full week of reduced-volume sales in August -- compared with 12.97 million mt from five auctions in the week ending August 2.

Weather forecasts showed a mixed bag for the first part of Week 32, with above-average temperatures in a region covering eastern France, southern Germany, northern Italy and most of the central European countries, but slightly cooler than normal conditions in the UK and Iberia, according to a five-day forecast Thursday from Custom Weather.
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