The Carbon Market 06.03.2019

EUAs spent most of the day bubbling just under the €23 mark. Prices made three attempts to move above this level but failed. Consequently, traders started to sell by around 16.30 CET and levels dropped sharply through to the close. Carbon ended the day down 3.6% at €22.11, just a cent above the day’s low.

The €5 price rise over the last past eight days proved too attractive to pass up for the market, and speculators cashed in. The rally may well be over for now, but the continued absence of investor selling (as opposed to speculators) suggests that the gains of the last week may well be consolidated rather than given up.

Two days ago, Bloomberg New Energy Finance has published new analysis in which it forecasts that the Total Number of Allowances in Circulation (TNAC) will shrink from 1.686 billion EUAs in 2018 to 1.465 billion in 2019. the implication is that net demand for EUAs from the surplus will come in at around 278 million EUAs.

Distribution of free EUAs for 2019 is now well under way, with member states having completed more than 60% of their allocation for the year. This may dampen market demand from continental installations who may be tempted to borrow from their 2019 allocation rather than pay the current high prices. Yet, compliance season continues, and while industrials may have become more proactive in their risk management, there are still enough installations that continue to pursue a “once-a-year” buying strategy to suggest that underlying demand will remain reasonable.

Today’s chart

Today’s close at the day’s low suggests that there is still some selling to come, so we should anticipate further weakness on Thursday morning at least. We’re back within range of the €21.83 support that held firm in mid-January and early February. Below that the region around €20.55 offers some support, and finally the strong € 19 support is not an impossible target either.

Source: Carbon Reporter, London