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EU CO2 prices fall in Week 36 as supply rebounds

Increase font size  Decrease font size Date:2019-09-10   Views:95
EU carbon dioxide allowance prices fell in the week ending September 6, coming under pressure as supply from government auctions rebounded after August's reduced sales.

EU Allowance futures contracts for December 2019 delivery on the ICE Futures Europe exchange fell as low as Eur24.85/mt ($27.45/mt) Friday, compared with Eur26.32/mt at the close a week ago, August 30.
The week-on-week drop has taken prices back down to levels last seen on August 23-27.

Bearish factors dominated the market through the week, with prices falling sharply on Monday, while Tuesday's carbon auction cleared at Eur24.82/mt -- the lowest auction price since June 17.

On the supply side, primary supply of EUAs from government auctions is set to rebound to normal levels in September, rising 84% to 53.7 million mt, compared with August's reduced supply of 29.2 million mt.

On the demand side, natural gas prices edged lower in the first few days of September, providing a bearish backdrop for carbon.

In Germany, the quarter-ahead indicative clean spark spreads rose relative to equivalent clean dark spreads in thefirst few days of September, compared with August's levels, suggesting slightly weaker hedging demand for EUAs.

Political uncertainties over Brexit also continued to hang over the market this week, with an ongoing risk that the UK pulls out of the EU ETS on October 31 if a no-deal outcome materializes.

These factors contributed to renewed price weakness at the start of September, although prices have tested the downside several times over the last two weeks at around Eur24.65/mt to Eur25.00/mt and seemed to find reasonable buy-side support at those lower levels.

December 2019 EUA futures prices stabilized later Friday to trade at Eur24.90 to Eur25.10/mt by late afternoon.

Looking ahead to Week 37, on the supply side, the total EUA supply from government auctions is set to rise to 15.8million mt from five auctions, compared with 8.3 million mt from three auctions in the week ending September 6.

The week-on-week increase in supply reflects auction volumes rebounding to normal in September, but also Week 36 saw an extra day of no supply due to auction host European Energy Exchange holding a working committee meeting September5.

On the demand side, wind levels were forecast to ease at the start of Week 37, dipping to a combined 13 GW in Germany, UK, France, Spain and Italy on September 9, before ramping up to 32 GW by September 11, according to forecasts Friday from spotrenewables.com .
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