Oslo, 28 July 2011

Carbon prices eased further on Thursday, with EU allowances falling to an eight-day low and CERs eyeing their lowest since March 2009 as concerns over supply and the debt crises in the U.S. and the euro zone lingered. Front-year EUAs opened unchanged from Wednesday’s settlement of 12.41 euros but quickly fell to 12.17 euros, their lowest level since July 18.

Buyers then emerged around 0700 GMT to support prices, pushing the contract back up to 12.29 euros by 0730 GMT, a decline of 12 cents or 1 percent from the previous day.

Volume was light at around 1.8 million units traded on the benchmark futures at the time of writing.

Secondary CERs were slow to trade but with a bid/offer on the December 2011 contract of 9.28/9.34 euros, the benchmark futures looked set to open below their 9.46-euro close on Wednesday and hit a new 28-month low.

Analysts at Thomson Reuters Point Carbon said they have a bearish outlook for carbon as there is little clear sign of progress on the U.S. debt situation.

“Yesterday’s break of the 12.50 euros also sends a bearish signal,” they added, writing in the Global Carbon Forum.

U.S. lawmakers worked frantically behind the scenes late on Wednesday on a compromise to avert what could be the country’s first default, looking to salvage a last-minute deal from rival debt plans that have little chance of winning congressional approval on their own, Reuters reported.

Financial markets have been increasingly on edge over the approaching August 2 deadline, as well as the lingering euro zone debt crisis on the other side of the Atlantic.

Ratings agency Moody's cut Cyprus's credit rating by two notches on Wednesday and warned another downgrade was possible, highlighting an energy crisis and exposure to Greece that threaten to tip the island into fiscal meltdown.

Markets have trained their sights on the east Mediterranean nation as a possible fourth recipient of a euro zone bailout since a huge explosion destroyed its largest power plant, and political wrangling now risks derailing much-needed economic reforms.

Meanwhile, energy prices were mixed, providing little direction for carbon prices.

German 2012 baseload power slipped by 9 cents to 57.45 euros/MWh while winter 2011 UK gas added 0.1 percent to 71.20 pence/therm and front-month crude oil gained 47 cents to $117.90 a barrel.

Ends --

By Michael Szabo – Point Carbon.

www.pointcarbon.com

London