EU carbon prices extended a 10-week high to reach €5.67 on Tuesday, but slipped later to end little changed, consolidating recent gains.
The Dec-16 EUA settled one cent higher at €5.59 on ICE after repeatedly hitting the €5.67 mark, the highest since Feb. 4.
Turnover on the front-year contract was steady at 12 million, representing 86% of total volume on ICE. It was the second consecutive session with a high proportion of dealing on the benchmark instrument relative to the rest of the curve, which could indicate that gains are being driven by speculators rather than utility buying.
Prices were little changed around the EU spot auction. The sale cleared at €5.63, 2 cents above the secondary market for the second day in a row. Bid coverage was 2.35, slightly above the 2016 to-date average.
Most key energy prices rose in sympathy with oil, which hit a five-month high above $44 a barrel after reports of a deal between key producers Russia and Saudi Arabia to freeze output.
Despite the movement in the energy complex, there was little direction from German clean dark spreads, which nudged slightly higher on the calendar 2018 and 2019 vintages as gains in German power prices edged rises in coal.
Carbon’s recent rally – coming in the form of two consecutive weekly gains from around €4.70 – could signal more than mere positioning around last week’s publication of 2015 emissions data, said analysts at Energy Aspects in a weekly note.
They added that this could either be due to the market getting tighter due to backloading or recent ETS reform discussions damping speculative short-selling, or even prompting long bets.
“Exactly what sort of adjustment is unclear, but Germany could, for example, push to bring forward the operation of the MSR by a year or more — the constraint on the implementation of any such rule change would be how long it will take to get the current reform package passed into EU law,” Energy Aspects said, adding that any reform measures were unlikely to be agreed before mid-2017.
By Ben Garside – email@example.com