EU carbon rebounded to hit a fresh three-year high of €8.71 on Thursday, extending the previous mark touched earlier in the week by a cent as traders reacted to choppy energy trade.

The Dec-15 EUA contract settled up 11 cents at €8.68, near the top of the day’s €8.55-8.71 range, on fairly thin volume of 8.5 million units.

“Power was completely crazy today and very volatile, but I was expecting more volume on carbon when it reached a new high, which makes me believe it cannot sustain these gains,” said one trader.

Next-year German baseload power prices rose 1.1% or 34 cents to €29.64/MWh on EEX.

But the rest of the energy complex was less bullish for carbon.

Cal-16 ARA coal prices initially dipped but climbed back to end 1.1% or 54 cents higher at $48.25/tonne on ICE.

A weaker euro made the fuel even more expensive for European utilities and, along with higher carbon, helped narrow the calendar 2017 and 2018 clean dark spreads by between 4.5-5.5%.

Analysts have suggested that EUA prices could be in for a brief correction after hitting overbought territory late last week and touching levels not seen since Nov. 2012.

Poland-based brokers Consus forecast that Dec-15 EUA prices will average €8.39 over Q4, up 2.2% from their €8.21 projection last month, as work gets underway on post-2020 EU ETS reforms and a long-term upward price trend continues, they said in an emailed note

The EU’s sale of 2.9 million spot EUAs cleared 3 cents below market with a bid-to-cover ratio of 2.48, below the year-to-date average of 3.1 but well above Wednesday’s three-month low of 1.72.

By Ben Garside – ben@carbon-pulse.com