European carbon prices managed to increase a massive €3,80 in Wednesday’s trading continuing the momentum which started on Monday when the final auction of 2023 was scheduled. This is the highest daily gain in absolute terms since April.

The upward trend from the previous day is maintained in early trading on Thursday, with EUAs reaching briefly €77,75, the highest level reached so far this December.

Meanwhile, in gas trading, TTF Jan’24 was trading briefly 5% higher compared to yesterday’s closing amid concerns over potential disruption in LNG deliveries from Quatar to Europe trough the Red Sea.  However, warmer weather and healthy supply could limit the upside.

“Apart from the bullish signals from the gas market, the development was also attributed to traders closing their short positions ahead of Christmas,” said trading company Energi Danmark in a note this morning.

Data from the Commitment of Traders (CoT) revealed that investment funds have reduced their bets on falling carbon prices. The funds were net short by 37 million EUAs last Friday, compared to 41,9 million EUA the prior week, having reduced their short positions by 1,4 million while increasing their long positions by 3,5 million.

Another reason for the sharp rise in the carbon prices is the lack of auction supply, with “the first auctions in 2024 being expected to start from 15 January,” according to the Directorate-General for Climate Action. Traditionally, the auction pause in December has been strongly supportive for the market in the past and the upward trend observed this Monday suggests that traders’ strategy could stick to tradition.