European carbon climbed late on Tuesday amid technical buying after the front-year contract breached a key level.
The benchmark Dec-16s settled 20 cents or 3.5% higher at €5.90, two cents off the session peak, after prices hit a three-week low of €5.65 earlier in the day.
Volume was healthy with 12.6 million units changing hands on the ICE contract, though turnover down the rest of the curve was light at 1.8 million.
The bellwether futures showed early weakness, but appeared to follow the rest of the energy complex and edge higher throughout the day.
The Dec-16s then jumped by as much as 1.4% after breaking above €5.84, the 50% Fibonacci retracement point between this year’s trough and peak. The key level had also provided technical support last week before prices bumped up against it earlier today.
However, EUAs appeared to meet more resistance from the Dec-16s’ 100-day moving average, which was hovering near the day’s peak just above €5.90.
German power and crude oil prices also provided support for carbon, both recovering from their intraday lows.
However, power ended slightly down, and combined with firmer coal and a softer euro, it weighed on the clean dark spreads, which had hit three-month highs on Monday.
Earlier on Tuesday, a group of 25 EU member states sold 3.425 million spot allowances for €5.65 each, in an auction that cleared 4 cents below market.
That was less than the 5-6 cent discounts seen in the previous two auctions, but still well above the 1-cent average seen so far this year in government EUA sales.
The auction attracted 18 participants who collectively bid for a total 7.37 million units, which translated into an oversubscription rate of 2.15 – in line with this year’s mean.
The same group of countries will on Wednesday sell 683,500 EUAAs in the year’s fifth airline allowance auction, before governments resume normal EUA sales on Thursday.
Analysts this week warned that carbon prices could see more volatility due to rumblings from governments over the idea of introducing a floor price for EUAs, as well as any progress surrounding post-2020 reform of the EU ETS.
By Mike Szabo – mike@carbon-pulse.com
