EU Carbon Plunges 10 Percent To Record Low Of 6.30 Euros
Author: Ben Garside-Thomson Reuters Point Carbon
EU carbon prices fell to their lowest ever level on Wednesday as the euro currency and equities slid on renewed fears over the bloc's debt crisis and oil prices tanked after producers promised to maintain high output.
The ICE ECX December 2011 EUA contract fell 73 cents to an all-time low of 6.30 euros, down 10.4 percent on Tuesday's 7.03-euro settlement.
By 16.30 GMT, the contract had recovered slightly to 6.41 euros on healthy turnover of around 15 million units.
The drop sends the contract into unchartered territory, falling well below its previous low of 6.77 euros on December 6 as market traders saw few signs of respite in the EU economy to boost demand for emission permits.
"I still don't see any bottom to this market," said one carbon trader, who said any positive sentiment from this weekend's landmark U.N. climate summit in Durban was purely psychological as it brought no increase in demand for permits.
"It's clear that Durban didn't help, and Canada's announcement of its Kyoto Protocol withdrawal tells you what little countries think about international agreements," he added.
On Tuesday, Canada confirmed it was withdrawing from the 1997 Kyoto Protocol, still the only global agreement to tackle climate change.
Wednesday's fall in EUAs extended the previous session's 6.6-percent slide and came as the euro currency broke below $1.30 for the first time since January after the U.S. Federal Reserve warned Europe's unresolved debt crisis could hurt the giant American economy.
Bond markets appeared to take little confidence from last week's agreement by EU leaders to strengthen the bloc's fiscal discipline as Italy sold debt at record euro-era borrowing high of 6.47 percent.
Carbon also faced pressure from the energy complex, which was led downwards by a $3 fall in front-month Brent crude oil prices to $106.15/bbl after the OPEC producer cartel vowed to keep high output levels for six months without outlining steps to cut production should demand wane.
Meanwhile, the December 2011 CER contract trading on ICE Futures Europe fell a further 13 percent on Wednesday to a new low of 3.80 euros as the market absorbed 1.1 million ERU credits issued late last night from Russia.
Front-year CERs had already plumbed new depths on Tuesday, dropping almost 10 percent on expectation that the market would continue to face a deluge of supply.