Thomson Reuters Point Carbon has released its latest cross-commodity scorecard, with the main market driver being the development of the conflict between Russia and Ukraine.
API-2 coal prices increased on Monday following an increase in European gas prices sparked by concerns over the developing conflict in Crimea. Prices dropped later in the week, as fears over the implications on gas and coal supply to Europe receded, and as traders questioned the impact on coal demand due to the high prices spreads between the two commodities.
The main driver for next week’s prices will be the development of the conflict between Russia and Ukraine, which will probably lead to continued heightened volatility in the market. The continuing state of oversupply in the Atlantic market, combined with the prospective return of exports from Drummond in Colombia later this month, will likely limit the upside potential.
The carbon market was unsettled last week amid changing signals coming from the surrounding markets driven by the unstable situation in Ukraine. The EUA Dec-14 contract managed to establish itself just slightly below the €7/t, ending the week on a bearish note.
Thomson Reuters expects carbon prices to be caught between bullish signals from the imminent backloading of allowances and potential bearish risks from the crisis in Ukraine. This week will see the first reduction in auctioning volumes, however the weekly volume will remain strong at 19 million t. The full impact of the backloading will begin to be reflected in supply volumes from next week when governments will auction only 8 million t.
Adapted from press release by Katie Woodward
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