EU carbon climbed to its highest for two weeks on Tuesday as speculators bet prices would rise during a two-day pause in governmental auctions and bullish signals for utilities.
The Dec-15 EUA contract settled up 20 cents at €7.48, near the top of the day’s €7.26-7.50 trading range on ICE amid healthy turnover of around 16 million.
Traders said the lack of auction supply provided a safe opportunity to place bullish bets with little resistance as most of the market expects prices to rise substantially by the end of the year.
“€7.25 was quite low considering all analysts expect prices to be above €8 at the end of the year. Maybe it’s the start of a trend up towards €8,” one trader said.
Early in Tuesday’s session, the EU sold 2.9 million spot EUAs in an auction that drew 12 million bids, the most in an EEX-hosted sale for almost a month.
A public holiday in Germany on Thursday means the next sale is not scheduled until Friday, a rare gap in the near-daily governmental auction supply.
Though one trader cautioned that today’s rise might be short-lived as auction supply hits a near-maximum 15 million next week.
German power prices moved in sympathy with carbon, while a stronger euro helped offset strong gains in coal prices.
This pushed German clean dark spreads for 2017 and 2018 to near-two week highs, making it more attractive for generators to sell their electricity forwards and buy the corresponding carbon to lock in profit.
By Ben Garside – firstname.lastname@example.org