The European carbon market ended last month on a bullish note. On Friday, despite dropping briefly below €66, a level last seen in April, the EUAS managed to rebound in the afternoon. At the end of the trading session, the Dec’24 contract settled at €67,47 with a daily gain of €0,80.

However, carbon allowances ended last month with a 9% decline as losses were recorded in 13 out of a total of 20 trading sessions held in June. Also notable is the recent decoupling from gas prices as TTF remained stable, closing at €34,480/MWh compared to €34,482/MWh recorded at the end of the previous month. 

According to LSEG analyst Wayne Brayn quoted by Montel News, “the carbon market’s correlation with gas prices was currently at its lowest since early December.”One of the reasons for the decoupling is the distribution of free allocation for 2024 which, according to the new calendar, should have ended on June 30.

The EUAs could have been weighed down by other bearish factors, including political uncertainty and speculators behavior, somehow correlated. “Carbon has responded bearishly to political signals, with the European Parliament election resulting in more climate-sceptic MEP’s, whereas the upcoming parliamentary election in France also causes some uncertainty,” wrote energy trader Energi Danmark in a note last week. 

Furthermore, the latest Commitment of Traders report revealed that speculative investors have increased their bets on falling carbon prices, following a massive reduction in long term positions from 37,5 million allowances to 31,9 million allowances, their lowest since the week ending on 19 April.

Traditionally, trading activity during summer is subdued. However, as compliance is scheduled for September, last minute buying from industrial and aviation companies ahead of the deadline could limit or even reverse the current downward trend.