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Coal and carbon levels settle

World Coal,

Thomson Reuters Point Carbon has released this week’s Cross Commodity Report.

The API-2 coal contract rebounded off the US$ 82/t level in the middle of the week, edging up on healthy German output in combination with a higher euro against the dollar and amid continued fears over a possible supply shortage during Q1 2014.

However, the bullishness was short lived and Friday’s drop brought the market back towards the US$ 82/t level, following a weaker euro.

Outlook for the frontyear contract seems uncertain, as the rebound was not convincing. Thomson Reuters expects the standing of the euro against the greenback to provide direction, as well as the undersupply fears for the first quarter of next year to continue and provide a neutral outlook for the contract this week.

Carbon prices traded €0.13/t lower week-on-week after a week of relatively high volatility incited by the inflow of news on the backloading negotiations and Friday’s COREPER meeting. The council reached a majority to begin backloading negotiations with the parliament, moving the backloading forward.

The expectation is that the market is now likely to consolidate after last week’s news driven volatility. Prices look set to remain buoyant around current levels as bearish pressure from the upcoming NER300 sales is offset by bullish support from high clean dark spreads which can continue to incentivise utility hedging and enhance demand at government auctions. Bullishness from German power prices could also add support.

Adapted from press release by Katie Woodward

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