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END OF DAY – Carbon edges down amid weak fundamentals

(Montel) Europe’s benchmark carbon contract traded lower on Wednesday in an overall bearish market but remained close to its recent resistance level of EUR 63/t.

The Dec 24 EUA contract last traded down EUR 1 at EUR 62.49/t on Ice Endex.

“The EUA price is very range-bound. It looks like nothing can move it away more than EUR 0.50 away from the EUR 63/t level in the past 10 days,” said Yan Qin, lead carbon analyst at LSEG.

“Fundamentals are still quite weak, with healthy auction supply entering the market almost every day and demand is dented by mild weather and dim industrial activities.”

While temperatures are forecast to drop, there is “just some smaller risk of really cold” weather, SMHI said in its seasonal report published today.

Next week, temperatures in Germany should average 4.6C, below the average of 6.4C expected for this week, but still 2.7C above the norm, according to Montel’s Energy Quantified (EQ).

Germany’s gross domestic product fell by 0.3% in the fourth quarter of 2023 compared with the previous quarter, according to government data, and the German Ifo Institute predicts GDP to fall by 0.2% quarter on quarter in the January-March period.

Stefan Kuester of German energy consultancy Enerchase agreed. “All macroeconomic indicators that are relevant for carbon are pointing south,” he said. “This is making it very hard to see rising carbon prices.”

Also, demand in the primary auctions seemed low, Kuester said, with investors bidding 1.99 times the volume on offer in the primary auctions last year on average, and only 1.75 times this year so far.

Coal’s 12-day low
In gas trading, the European benchmark TTF front month was last seen down EUR 0.64 on the day at EUR 69.45/MWh amid high gas stocks.

EU storage was last seen just under 69% full, 1.5 percentage points lower year on year, Gas Infrastructure Europe data showed.

In the coal market, the API 2 front month dropped to a 12-day low earlier in the session at USD 93.50/t amid ample supply and sluggish demand, but was last seen up USD 0.65 at USD 98/t.