March 1, 2012 / 9:21 AM / 6 years ago

EU carbon rebounds 2 percent after steep losses

LONDON, March 1 - European carbon prices rebounded nearly 2 percent on Thursday after posting steep losses in the previous two sessions and notching a new 10-day low shortly after market open.

Front-year EU Allowances opened 13 cents higher but fell to a session low of 8.45 euros within the first four minutes of trade, 11 cents below Wednesday’s settlement and the lowest level seen since February 16.

The bellwether contract then climbed back to an intraday peak of 8.72 euros by 0835 GMT.

Volume was light at around 1.6 million units.

“Yesterday’s sharp drop in carbon prices in the last trading hour should be compensated by a slight upside correction this morning,” said Thomson Reuters Point Carbon analysts in the Global Carbon Forum.

“However, given the neutral to bearish picture that is provided by power and fuels we expect the EUA Dec-12 contract to end this day around yesterday’s close.”

The December 2012 EUA fell as much as 45 cents in the last 75 minutes of trade on Wednesday as traders took profits to end February, a month that had seen as much as 20 percent added to prices.

Traders attributed the past two days’ weakness to speculator selling after EUAs hit a 10-week high of 9.63 euros on Tuesday on news that the EU Parliament’s industry committee had voted in favor of withdrawing an unspecified number of permits from the market starting in 2013.

EUAs are now down around 9.4 percent from that peak.

Market participants also said weaker power and gas were weighing on carbon prices.

On Thursday, German calendar 2013 baseload power also rebounded after two days of losses, adding 25 cents or 0.5 percent to 52.95 euros/MWh.

UK gas was mixed across the curve, with prompt contracts falling as much as 2 percent and futures for next winter delivery edging up 0.1 percent.

Brent crude oil held steady above $122/barrel, drawing support from faster-than-expected expansion of the U.S. economy and better factory data from China amid concerns of supply disruption from the Middle East.

Positive numbers from two of the world’s biggest oil consumers have put a floor under prices even after the contract surged 10.5 percent last month to its highest since February 2011.

Reporting by Michael Szabo

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