Carbon spikes 49% in just over 2 weeks

EUAs rose above the EUR 21/t mark for the first time in three weeks as energy prices continued their recovery on Tuesday.

The benchmark Dec 20 EUA contract last traded 4.2% higher at EUR 21.26/t on Ice Futures.

Carbon has surged 49% since falling to a 21-month low of EUR 14.34/t a little over two weeks ago.

German Cal 21 power and year-ahead TTF gas both rose for a fourth successive session, while coal and Brent crude were also higher for the third day in four.

The front-month contract for Brent was last seen up USD 0.72 at USD 33.77/bbl.

Surprise recovery

Most sources expressed surprise that the market had recovered so much, while there had been little if any improvement in the macroeconomic outlook.

“The [EUA] rally isn’t stopping despite people believing it’s overdone,” said Yan Qin of Refinitiv.

Some sources speculated carbon might be targeting the last “gap” in prices, which occurred between 13 March, when the market posted a low of EUR 21.75/t, and 14 March, when prices opened at an intraday high of EUR 21.50/t.

“To think that we’re just EUR 1.50 short of where we were before the coronavirus pandemic is nuts,” said one trader.

“The gains look like a combination of short-covering, stronger energy prices, and compliance buying ahead of the April deadline with reduced auction supply for the next two weeks thrown in,” said Tom Lord of Redshaw Advisors.

Optimism regarding the slowing of the rate of infection in several European countries had also boosted wider economic sentiment.

(from Montel, original article here)