Oslo, 4 May 2010

EU carbon prices tumbled more than 3% today, as market participants took profits. The benchmark carbon dioxide allowance for December delivery was valued at EUR 15.97 by the close of the session on Tuesday, compared with the previous day’s finish of EUR 16.50 in the cleared broker market.

On the European Climate Exchange this morning, the front-year CO2 allowance had been as high as EUR 16.73, the contract’s loftiest intraday trade since 11 May 2009 when it topped at EUR 16.75. 

“Once it started falling away from the high, people got nervous and the price came crashing down,” said one carbon trader.

“Technically, the market looks a bit top heavy at the moment. We’ll have to wait to see what the open is like tomorrow,” he said. 

The December 2010 EUA hit an intraday low of €15.86 in late trading on Tuesday. Longer-dated carbon contracts also concluded the session down by more than 3% on the day. Apart from a lack of follow-through buying, traders also attributed the weakness in carbon today to softer prices in key energy markets, notably German power and oil. 

The German power baseload 2011 contract, which generally moves in line with carbon, closed at EUR 54.00/MWh, down EUR 0.32 from the previous day’s settlement on the European Energy Exchange. 

The front-month Brent crude contract was changing hands at $86.47/ bbl on the Intercontinental Exchange by 17.30 CET, compared with $88.85/bbl at the same time on Monday.

“The whole energy complex was up yesterday and carbon went along with it,” said another trader. “But oil is off sharply today, so maybe carbon is coming off because of that,” he said.

Despite the drop in carbon prices, trading turnover in future and forward EUAs was a whopping 45 million across all platforms at the time of writing. That compares with last week’s daily average volume of just under 40 million. 

In its weekly spot allowance auction, Germany today sold 300,000 spot EUAs at EUR 15.91 each. That compared to its auction last Tuesday when it sold the same number of spot allowances at EUR 15.30.

By the end of trading on Tuesday, the spot EU allowances was valued at EUR 15.78, down EUR 0.51 from yesterday’s close in the cleared broker market. 

Meanwhile, prices of UN-backed CERs in the secondary market moved lower in line with EUAs.

The December 2010 CER was valued at EUR 13.95 at 17.30 CET, compared with a value of EUR 14.45 in late trade in the previous session. That narrowed the EUA-CER 2010 spread to EUR 2.02 from EUR 2.05 at the close on Monday. 

“When the EUA price goes up the EUA-CER spread generally widens, and when the EUA price goes down the EUA-CER spread narrows,” one trader said, explaining that “demand for EUAs far outweighs demand for CERs.”

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