European Union carbon permits fell for the first time in six weeks as traders cut bets on higher prices after lawmakers agreed on a watered-down proposal to combat a surplus of allowances.
Permits for December declined 1.1 percent to close at 4.38 euros ($5.74) a metric ton on the ICE Futures Europe exchange in London. That’s the lowest since June 11 and took this week’s decline to 8.2 percent. The amount of outstanding contracts, or open interest, in the benchmark future has fallen 7 percent from a record on June 6.
“It seems that in the short term carbon won’t go higher,” Milan Hudak, an analyst at Virtuse Energy sro in Prague, said today by e-mail. “Prices are falling due to profit taking and slightly weaker Germany July power.”
The European Parliament’s environment committee approved on June 19 a compromise version of a measure to temporarily delay the sale of some permits after the original plan was rejected by a plenary vote in April. The amended proposal will return to the European Parliament on July 3, when the entire assembly is scheduled to vote on the plan.
Open interest for December carbon has fallen 43.5 million tons in the past two weeks to 579 million, according to ICE data. Falling open interest in a weakening market can indicate traders are closing bets that prices will rise.
The drop in permit prices has come in tandem with European power, where German electricity for July dropped 2.3 percent this week to 30.05 euros a megawatt-hour. Lower power prices reduce utilities’ incentive to sell electricity forward, cutting the need to hedge with carbon futures.
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