Barclays slashes H2 2012 carbon price outlook
29/05/2012 by REUTERS
Barclays analysts on Monday cut their second-half 2012 price outlook for
European Union carbon by 28 percent, citing a growing supply glut and prospects
of further deterioration in the EU economy.
The analysts forecast EU Allowances to average 6.5 euros ($8.13) a tonne in
the second half of this year, down from a previous estimate of 9 euros a
tonne.
"While there are risks on both sides, the downside risks appear more dominant
this year," they wrote in a research note.
"The reason for this is likely to be that any material deterioration in the
European economic outlook will be first felt in 2012 and the supply side,
regardless of intervention, is going to swell as we go through the year," the
note added.
Carbon prices lost around half their value last year due to Europe's slowing
economy, coupled with a carbon permit supply glut estimated in the hundreds of
millions.
The benchmark carbon price was trading just below 7 euros a tonne on Monday,
struggling to recover from a record low of 5.99 euros a tonne hit in early
April.
Barclays estimated that a further 300 million EU Allowances and 300 million
international offsets will flood the market over the next nine months,
particularly in the fourth quarter of this year and the first quarter of
2013.
"All of this supply will be difficult to absorb by the market, suggesting
downside to prices from current levels and this holds regardless of any
developments on the set-aside," the analysts said, referring to an EU debate on
whether a certain number of permits should be withheld from the market after
2013.
"The issue with the set-aside is this does not physically affect the supply
and demand balances until 2013, the first year the effective cap could be
reduced by the set-aside," the note said, adding there may be upward pressure on
prices in H2 2013.
($1 = 0.7992 euros) (Reporting by Jeff Coelho; editing by James
Jukwey)
Copyright 2012 Thomson Reuters
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