European carbon hit a new three-year high on Wednesday, as buyers pushed the price above the previous year-to-date peak of €8.43 amid tightening supply.
The Dec-15 EUA futures trading on ICE Futures Europe climbed to as high as €8.47 – a daily gain of 14 cents or 1.7% – before ending the day at €8.45.
The last time front-year EUA prices hit these levels was in Nov. 2012.
Wednesday afternoon’s price gains came after several attempts to break above €8.40 earlier in the day, which was the contract’s upper Bollinger band.
EUA prices had been consolidating within a new trading range above €8.27 after jumping to a seven-week high Friday on a strong EU auction and short-covering.
Analysts have noted that a breach above €8.43 could next be met by technical resistance at the psychologically-important €8.50 mark.
The Dec-15s’ RSI level is currently around 62, nearing the 70 mark that can indicate an instrument may be overbought.
The benchmark contract is up by more than 15% so far in 2015, gains which most market participants attribute to Backloading, which will withhold 300 million allowances from government auctions this year, as well as the approval by lawmakers of the Market Stability Reserve this past spring.
In contrast, most energy and commodity prices are lower for the year – many showing weakness against rising supply and fears of slowing economic growth in China and other emerging economies.
Earlier on Wednesday, the UK sold 3.123 million spot EUAs for €8.29 each, in an auction that cleared 4 cents below market and attracted bidding equivalent to 6 million units.
The weak result did not faze the market, with prices edging higher shortly after the sale’s results were published.
Meanwhile, the euro rose against the dollar for a fifth straight day, while European coal continued to drop, nearing $48/tonne.
The two factors combined to push the Calendar 2016 ARA coal forwards down to a decade low of €42.15/tonne.
German baseload power prices firmed, which pushed German clean dark spreads up by at least 2% across the board.
CERs failed to rise in parallel to EUAs, with the front-year futures ending unchanged at €0.58 on light volume of 50 lots, and the Dec-16s adding a cent to €0.52 on turnover of 150,000.
By Mike Szabo – mike@carbon-pulse.com
