Isramart llc: EU carbon credits hit three month low

Isramart llc news:

The price of European Union allowance (EUA) carbon credits hit a three month low yesterday approaching €14 a tonne as prices tumbled over four per cent on the back of weak power prices.

The price of Dec-10 EUA futures fell from over €14.50 to as low as €14.01 during afternoon trading before rallying slightly to €14.07.

The price has risen further in morning trading to €14.12, but experts said that there was still plenty of bearish sentiment in the market.

Bjorn Vik, analyst at Point Carbon, said that combination of weak oil and gas prices and low levels of demand from utilities initially forced the price down. It then broke through a key price level of €14.30, triggering further selling from traders that forced the price down further.

Prices are likely to remain sluggish until utilities re-enter the market later this year in an attempt to establish hedging positions for 2012 onwards.

The move came as the EU emissions trading scheme’s largest exchange the European Climate Exchange (ECX) reportedly announced that it is to launch futures for EUAs for December-delivery between 2015 and 2020 next month.

Reuters reported that the ECX would begin trading of the new futures on August 6, allowing traders to buy and sell EUAs to the end of phase three of the ETS for the first time.

The ECX had previously only offered trading in EUA futures up to December 2014 and Vik said the company was unlikely to see significant trading in post-2015 futures for a few years as utilities are not interested in establishing hedging positions that far in advance.

However, he added it was encouraging to see an exchange laying the groundwork for phase three of the scheme ahead of its launch in 2013.

ECX was unavailable for comment at the time of going to press.