EU carbon prices extended a 33-month high for the third consecutive session on Friday, beating the previous mark by 10 cents to reach €8.36.
The benchmark Dec-15 contract had barely budged in thin trade before jumping from €8.23 at 1043 GMT to an initial peak of €8.29 amid a flurry of trades that doubled the day’s turnover on ICE to 4.6 million.
The contract climbed further in the afternoon and settled 13 cents up on the day at €8.33 on relatively thin volume of just over 8 million units.
It has gained 54 cents or 7% week-on-week, at the halfway stage of a month of reduced auction supply.
AUCTION DEMAND HIGH
Earlier in the session, Germany’s auction of 1.599 million spot EUAs cleared at the same level as the secondary market at €8.15 and was 3.5 times oversubscribed. Prices were little changed afterwards.
The week saw the lowest auction supply this year at just under 6 million and all four sales cleared with bid-to-cover ratios above the year-to-date average of 3.06.
Governments have cut the amount of allowances they sell at auction by more than half throughout August to account for lower holiday period demand. The addition of a UK sale next Wednesday bumps the weekly total to 7.54 million.
The energy complex also provided a slightly bullish signal for carbon this week, as German baseload clean dark spreads for both 2017 and 2018 have been around 10% higher than the previous week, boosting the incentive for utilities to sell power and buy the corresponding carbon.
SUSTAINED GAINS?
While some dealers expected further gains while auction supply remains muted, others were more sceptical that the week’s increase could be sustained.
“For me the market looks a bit weird with all this jump without any serious correction, probably last week of August we might see the prices under €8,” one trader said.
“I have a feeling that this price jump was mainly due to speculators,” he adding, pointing out that in December prices had climbed on slim volume only to correct swiftly in January.
Turnover across all platforms has averaged just over 10 million so far in August, below the year-to-date average of around 17 million.
Below are the auctions this week, distance to market, bid-to-cover ratios:
8/10/2015 EU 1,459,000 +€0.01 v market, btc 3.84
8/11/2015 EU 1,459,000 +€0.02 v market, btc 3.52
8/13/2015 EU 1,459,000 -€0.01 v market, btc 3.20
8/14/2015 DE 1,599,000 -€0.00 v market, btc 3.51
Next week’s auctions:
8/17/2015 EU 1,459,000
8/18/2015 EU 1,459,000
8/19/2015 UK 1,564,500
8/20/2015 EU 1,459,000
8/21/2015 DE 1,599,000
By Ben Garside – ben@carbon-pulse.com
