Monday, July 23, 2012

Carbon sideways, below 7.00 euro


Last week the price of EUAs tumbled down from 7.50 (what seemed to be a good support, at least psychological) down to 6.70, following the rather disappointing news on re-scheduling of the EUA auctions [read our previous Carbon post]. On Friday afternoon it climbed back above 7.00 mark following a short covering buying.


It also turned out on Friday, that apparently the EC will propose a timing of when the emission allowances will be auctioned, which can be read as "the number of units to be held back from early auctions will be known or can be derived from the published documents". It could be supportive, but then along came Greece and IMF where rumour says (unofficially) that the next bailout payment tranche can be suspended if it turns out that the Greeks are not making enough progress in the austerity measures they are committed to. EURUSD fell out of bed (falling to lowest since June 2010), Brent and stock market went down and the EUA is traded -3.8% lower as well.

Given the sensitivity of the information which is to be published on Wednesday, we don’t expect significant movements on the market before that time. Also the less clear the communication will be, the more different interpretations of the news by the traders and more volatile the market will be. Echoing most recent analysis, any quantity of allowances to be withheld or which sale will be postponed, which is lower than 1bn, should have a bearish reaction on the market [although short- to midterm volatility is expected as we wrote above]

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