EU carbon dips in investor selling drive

on January 12 2010 9:42 AM

LONDON - European carbon emissions futures dipped on Tuesday as investors sold permits to entice industrial companies into selling to drive prices lower, traders said.

The benchmark contract for Dec-10 EU Allowances fell 13 cents or 0.90 percent to 13.05 euros a tonne at 1150 GMT, after dipping to an intra-day low of 12.78 euros in early trade. Volume was heavy at 4,358 lots.

Players pushing up prices yesterday are now selling some of it. Support is 100 percent financial. There are no utilities buying -- they are waiting to see if they can sell at a better price, an emissions trader said.

EUA prices had been on the rise since last Thursday, due to prolonged cold weather in Europe, firmer UK gas prices and financial institutions covering short positions.

Prices have rebounded by 6 percent from an almost six-and-a-half month low on January 6.

It's purely technical play. Some players want to see if they can spark selling from industrials but so far they have been much more subtle, the trader said.

Industrial companies with surplus EUAs due to reduced output during the economic downturn are expected to sell those permits heavily in the coming weeks.

Just because you don't see them doesn't mean (industrial selling) is not happening. They are less under strain than last year and have more time to plan what they are doing, the trader added.

Prices fell to nearly 8 euros last February when cash-strapped industrials sell EUAs heavily.

A German EUA auction on the European Energy Exchange cleared at 12.71 euros a tonne on Tuesday. A futures auction will be held on Wednesday at 14.45 CET.

German Calendar 2011 baseload power on the EEX fell 50 cents or 0.97 percent at 50.85 euros. U.S. oil slid below $82 a barrel as a milder weather forecast in the U.S. Northeast signaled lower fuel consumption.

British gas prompt prices slumped by 5.88 percent to 36.00 pence per therm as Norwegian supply recovered, milder temperatures and lower U.S. prices.

Certified emissions reductions were down 14 cents or 1.22 percent at 11.35 euros with light volume at 192 lots.

(Reporting by Nina Chestney; Editing by xxx)

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