The European benchmark carbon contract traded briefly above €70 in yesterday’s session, the highest since early September. The EUAs last traded at  €69.51, more than 2% above last Friday’s settlement.

Early Monday, European carbon traded lower as the market took direction from the falling gas. However, the EUAs reversed trend as soon as the auction closed, with market participants blaming speculative buying for the sharp rise.

The sale on the EEX platform for 3,29 million allowances closed at €67,70 euro with an open interest of 1,63, clearing with a slight premium to the secondary market. However, the “stronger than usual auction outcome appeared to trigger a wave of technical and speculative buying that moved the market as much as €2.00 higher,” observed Carbon Pulse.

On the gas market, TTF front month was rather stable, despite Gazprom’s decision to halt gas deliveries to OMV and reduced Norwegian flows following outages at the Oseberg and Asgard fields.Transit data suggest that Russia “is still selling into the sport market in Europe”, wrote ING in a note to its clients adding that “we have not seen any meaningful drop in Russian pipeline flows to Europe yet.” 

The combination of cold weather and uncertainties over gas deliveries will continue to be bullish signals for carbon. We expect carbon prices to remain volatile until the end of the year when the five year contract governing the Russian gas transit through Ukraine expires.