EU carbon prices posted a 4.4% gain to close at €5 on Wednesday following a late spurt, with some traders attributing the day’s gains to short-covering ahead of Friday’s ETS emissions data release while predicting more to come.

The Dec-16 EUA contract eventually settled up 18 cents on ICE at €4.97, on modest volume of 10.2 million. A further 3.3 million were dealt on other vintages on the London-based exchange.

“This is a bigger movement than we’ve seen in days, it could be start of bullish momentum, though there remains few buyers around,” said one trader.

Prices defied overnight oil gains to slip to as low as €4.75 in early trade but lifted following stable results at the day’s auction amid a broadly stronger energy complex.

Poland’s spot auction cleared at €4.77 at 0900 GMT, a cent above market for the second day in a row. Bid coverage 2.13 was higher than Tuesday’s 1.99 though still below the year’s average of 2.21.

There was little direction from the energy complex as German clean dark spreads were virtually unchanged.

This was due to gains in carbon and dollar-denominated coal being neutralised by higher power prices and a stronger euro, which rose as the US Federal Reserve Chair Janet Yellen pushed out expectations for the next US interest rate hike.

Today’s strong finish puts carbon above its 20-day moving average and above a general downtrend in place since late Feb.

The trader suggested the gains could be due to short-covering ahead of Friday’s release of 2015 EU ETS emission data, despite low expectations that the final numbers will move the market.

“There can always be a surprise with these figures,” he added.

Traders at Redshaw Advisors Carbon said the gains could spur further increases for the rest of the week.

“Recent price moves in either direction have been muted with a lack of follow through however the close at the high of the day gives carbon some momentum going into tomorrow,” said in a post-close note to clients.

By Ben Garside – ben@carbon-pulse.com