EU Carbon Prices Recover, Close Above 16 Euros
European carbon prices clawed back from being down nearly 3 percent early on Wednesday to close back above 16 euros a tonne after energy and equity markets staged a late day recovery, traders said.
EU Allowances for delivery in December closed at 16.03 euros a tonne, up 11 cents or 0.7 percent, on heavy volume of 24,088 lots traded.
The benchmark futures had dropped as low as 15.50 euros a tonne shortly after 0800 GMT, as traders said lower German power prices and worries about the euro spooked the market.
German Calendar 2011 baseload power closed down 45 cents at 53.55 euros per megawatt hour after opening down nearly 4 percent at 51.90 euros.
The euro clawed back some of its losses against the dollar on Wednesday but remained lower on the day as investors worried that a debt crisis in Greece may spread to other indebted euro zone countries.
U.S. crude oil futures fell to $79.15 a barrel, the lowest since March 22, as the Greek crisis also rattled that market and rising crude stocks pointed to tepid demand.
Nearby British natural gas futures lost 0.95 pence or 2.5 percent at 36.5 pence per therm.
EUAs are still down 70 cents or 4.2 percent since hitting a 17-month high of 16.73 euros early on Tuesday.
Some traders said a correction was expected as EUA prices had risen too high, too fast.
"The fundamentals haven't changed in the last week ... They're still bullish as open interest is increasing by around 4 million tonnes daily," one emissions trader said.
Despite a 60 cent or 3.6 percent drop in Dec-10 EUA prices on Tuesday, open interest increased by 193 lots to 179,910.
EUAs gained some 24 percent in April and a further 5 percent in the first two trading days of May before falling back to 15.50 euros on Wednesday morning.
Germany auctioned 570,000 tonnes of EUAs for 15.62 euros a tonne on Wednesday afternoon.
Benchmark Dec-10 CERs closed up 3 cents at 13.90 euros a tonne while the Dec-11's fell 11 cents to 13.38 euros a the Dec-12 by 22 cents to 1.7 percent to 13.05 euros.
The Dec-10 EUA-CER spread closed at 2.13 euros, the highest level since June 2009.
A United Nations agency on Wednesday cut its forecast for pre-2012 Kyoto Protocol carbon offsets, estimating for the first time that less than 1 billion tonnes will come to market before the climate pact expires.
An EU proposal to introduce a new multiplier restriction for using CERs in the EU ETS has been praised by environmentalists and panned by market players.
Under the proposal, first published in a draft EU document seen by Reuters last Friday, the value of "conventional" CERs could be halved as scheme participants would be required to buy at least two to cover one tonne of carbon dioxide.