Spot NZUs had a strong week, climbing 24% to close at NZ$6.70 ($4.69), their highest level since early April as fresh demand pushed prices up.

The spot allowances began the week near last Friday’s closing price of NZ$5.40, trading in healthy volumes. But as ready supply began to dry up, prices soared. On Friday alone, NZUs rose 55 NZ cents.

“The inter emitter trade that was keeping the market soft seems to have dried up. Now it’s all buyers and very little sellers,” one observer said.

By Friday closing time the sell side had retreated to NZ$7.10 on Carbon Match and NZ$8.30 on OM Financial’s CommTrade.

“The market will probably need to take a hold for a bit to take a breath. I don’t think other emitters are ready to pay these levels yet, but I expect the market to remain firm,” the observer said.

The market had dwindled into the low NZ$5s in recent weeks as emitters were primarily engaged with their 2014 compliance, but with that over with and access to cheap UN offsets has been lost, many buyers appeared happy to pick of substantial volumes at what might be considered low prices if the impending ETS review leads to tighter rules.

By Stian Reklev – stian@carbon-pulse.com