(Montel) European carbon prices retreated from near 10-year highs in Wednesday trading amid widespread profit-taking but were likely to retain some support from lingering utility demand and limited August supply.
“With higher temperatures set to remain through at least end-August, weather-related power demand will continue to play a role,” said Pira analysts in a note.
Temperatures across Europe will likely remain 1-3C above seasonal norms for the next two weeks, according to forecaster SMHI.
“Lower auction volumes for the remainder of August will also support prices,” Pira said, regarding auction volumes falling by half this month – compared with July – to 44m allowances.
A carbon trader also cited the supportive influence of a large European utility buying carbon credits.
At the same time, the cancellation of nearly 22m carbon allowances from German auctions this winter will tighten supply and could spur the ETS market’s current rally, Montel reported earlier.
European coal prices, meanwhile, retreated further from the previous session’s one-month highs amid a lack of physical trading activity and a weak euro versus the US dollar.
The API 2 front-month contract was seen down USD 0.45 at USD 98.75/t, while the front year was USD 0.94 lower at USD 87.95/t.
The contracts on Tuesday reached their highest levels since 19 July, of USD 99.35/t and USD 89.20/t, respectively, amid lingering generation demand for coal.
But the euro’s value against the greenback has eroded by more than 3% over the past month, to around 1.13 – its weakest level for more than a year – thereby deterring European buyers from purchasing non-essential dollar-linked coal.
Gas prices in the UK and on the continent also softened in line with coal and oil markets.
The day-ahead contract on the UK’s NBP hub traded last down 0.30p/th at 60.10p/th, while the Dutch TTF equivalent was EUR 0.10 lower at EUR 23.35/MWh.
The Brent North Sea crude front-month contract traded last down USD 1.89 at USD 70.57/bbl.