Tuesday, April 16, 2013

EUA Dec13 hit new historical low on back-loading rejection by Parliament

As we said in our last entry, the increasing trend channel broke last week and it got its final head-shot today.
After falling to EUR 4.26 last week on EPP member Korhola’s tweets, the price tested the resistance level at EUR 5.00, but couldn’t break above. Today the EUA Dec13 opened at EUR 4.79 and there were some late speculators hoping for a positive outcome and pushing price up to EUR 4.95. The EUR 5.00 was not broken today either which was a negative sign already. Shortly before the vote the price fell from EUR 4.60 to EUR 3.76, as people closed speculative long positions and hit stop-loss levels.
The negative vote after noon time sent the price to a new historical low at EUR 2.63 to recover slightly later in the afternoon. (The former historical low was reached January 24 when ITRE rejected the back-loading at EUR 2.81.)

The picture looks bearish.  The ETS is still alive, meaning that installations have their compliance obligations. This can support prices at the current levels for the time being, but there is a significant downside risk after the compliance deadline of April 30. Without new announcements from the Commission on a back-loading alternative, the price can easily plummet to new historical lows again. Based on options traded today, some market participants calculate with a carbon price of EUR 2.00.
In the case the rapporteur comes up with a new text in the coming two months, speculation might start again and help the EUA Dec13 to recover. The price however has to face couple of resistances above EUR 4.00. There are local lows waiting at EUR 4.26, the 30-days moving average is at EUR 4.35, its 20-days peer at EUR 4.56.
And finally the EUR 5.00 appears in an unattainable distance…

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