EU carbon slips further ahead of auctions

LONDON Tue Feb 2, 2010 2:06pm GMT

LONDON (Reuters) - European carbon futures dropped for a fifth straight day on Tuesday, losing over one percent as traders anticipated over 5 million tonnes of new EU emissions permits coming to market via auction this week.

EU Allowances for delivery in December slid by as much as 18 cents or 1.4 percent to 12.54 euros a tonne, their lowest level since January 7. Volume was moderate at over 1,800 lots traded.

The benchmark futures have lost over one euro in the past five sessions after closing at 13.61 euros last Tuesday.

Spot EUAs trading on BlueNext were down 6 cents or 0.5 percent at 12.51 euros.

"We're seeling a sell-off ahead of the auctions as we'll see more than 5 million tonnes come to market and that's weighing on people's minds," one trader said.

Germany, in their weekly EUA auctions, will sell 300,000 tonnes later this morning and 570,000 tonnes on Wednesday afternoon.

The UK will sell 4.4 million tonnes on Thursday morning in its monthly auction.

"We're seeing some utility support at these levels, and not much industrial selling," the trader added.

German calendar 2011 baseload power was unchanged at 48.85 euros per megawatt hour while British gas prices slipped by 0.42 pence or 1.2 percent to 35.15 pence per therm.

Oil pared gains as the dollar strengthened, with the market's attention turning to forecasts for steady U.S. crude inventories after prices topped $75 earlier on optimism about the economy.

Benchmark CERs lost 11 cents or one percent at 11.05 euros a tonne, setting the EUA-CER spread at around 1.50 euros.