(Updates throughout)
European carbon prices climbed back above €6 on Thursday following a very bullish EU auction, rising by as much as 5% at one point on the back of a surge in oil.
The front-year futures on ICE rose by as much as 30 cents to an intraday high of €6.23, jumping along with crude oil and other energy prices on reports that Russia’s Energy Minister Alexander Novak said OPEC and other oil producers were considering meeting next month to discuss a possible reduction in output.
The benchmark EUA contract eventually settled up 16 cents at €6.09 on strong volume of 26.9 million units changing hands.
Front-month Brent jumped by almost $3 to a session high of $35.84/barrel on the news, but slid back after it emerged that there were no such plans for talks.
Several traders have noted that carbon has become more closely correlated with oil prices, a trend that has not been widely observed in the EU ETS since the late 2000s.
EUA prices gained earlier on Thursday after a group of 25 EU member states sold 3.425 million spot units for €6.02, in an auction that cleared 6 cents above the secondary spot market, the largest premium recorded in over a year.
The sale drew 25 participants who collectively entered bids for a total 9.24 million, equating to an oversubscription rate of 2.70, above the 2.23 average in the auctions held so far this year.
The last time an auction attracted 25 or more participants was early Nov. 2015.
According to EEX data, just eight bidders were successful and took home an average 428,000 units each, which was the most since last September and, in light of Thursday’s mean bid of €5.88, suggested that a few participants were more aggressive in trying to pick up allowances at current prices.
EEX said the mean price is an arithmetic average of all bids at the time the auction order books closes, rather than a weighted average price.
The rest of the energy complex had been notably higher earlier on Thursday, including German power, Rotterdam coal, UK gas and Brent crude, which along with a stronger euro lent support to carbon.
But European coal reversed course, with the Cal-17 contract down 21 cents to $39.70/tonne by 1730 GMT.
German baseload power also erased most of their earlier gains, closing marginally higher, while UK gas receded into the red.
Combined, the factors still managed to bump German clean dark spreads higher by at least 4% across the board.
The Dec-16 EUA price, while off the 20-month low of €5.61 plumbed on Tuesday, remains down some 26.5% for the year so far, though some traders have called the end to the recent drop, expecting prices to continue consolidating around current levels.
By Mike Szabo – mike@carbon-pulse.com
