The European carbon market closed higher for the third consecutive session on Wednesday, boosted by a strong auction and rising gas prices. The EUAs traded as high as €58.88, the highest intra-day price in two weeks, before closing at € 57.84 while posting a massive increase in trading volume.

The sale of 2,31 million allowances on behalf of Poland closed at €54,94 well above the trading on the secondary market at that moment. Furthermore, the bid coverage was 2,06, above this year’s daily average of 1,71, suggesting a strong demand.  

At the end of the day, the total trading volume on the secondary market reached 46 million allowances, the highest in more than a year and almost double the year’s daily average of 25,7 million.

Some of the recent price increases can be attributed to analyst reports describing carbon as an attractive commodity, reports which began sprouting up a lot in the past week like mushrooms after a warm rain.

“Our strong view is still that the deal of the year is to build strategic long positions in EUA contracts” wrote Swedish bank SEB in a note published on Tuesday.  “CO2 price is set for an upward trend again to meet climate goals” added ABM AMRO also this week.

And the examples do not stop here. “Carbon appeared oversold and offered an attractive entry point at present prices, said Morgan Stanley in a note seen by Montel News this week.

Another article was published yesterday in the Financial Times, entitled suggestive: “Europe’s carbon price crash looks like serious market myopia.” The article brings back memories of the old carbon drama: “Want to make a quick buck? … When the Financial Times runs its next piece on EU carbon allowances, trade them immediately”, wrote Carbon Pulse back on 29 August 2020.

In the meantime, the latest Commitment of Traders report released last week, revealed that net short positions by investment funds, suggesting bets on falling carbon prices, increased to a record of 39,2 million allowances.  

Meanwhile, on the gas market, TTF front month increased by 4,5% following reduced gas deliveries from Norway amid an unplanned outage. Still, “the latest forecast indicates milder weather and a rise in renewable power output, suggesting lower consumption for the day ahead,” according to a note by LSEG seen by Reuters.