The European carbon market experienced yet another volatile trading day with EUAs trading briefly  at € 71,82 in the afternoon. However, carbon struggled to hold onto the gains, with Dec’25 contract settling at €70,60, more than €1 below the intra-day high, still posting a 1,41% increase compared to the previous session.

Yesterday, we initially saw a downward trend  on the carbon market. However, prices started to surge shortly after the day’s auction on behalf of 25 EU Member States. The sale of 3,2 million allowances cleared at €69,20 above the secondary market at that time while the cover ratio of 1,81 was the second largest seen this year for an EU sale, suggesting increased interest in buying. The volatility in the carbon market was also driven by the imminent expiry of March EUA options as traders are hedging their exposure at certain levels. 

Source: EEX auction results

Furthermore, “European carbon resumed its close correlation to natural gas price movements,” according to Carbon Pulse. Initially, TTF front month traded higher, amid cold weather forecasts and low wind conditions expected in Central Europe, dragging up carbon prices.

However, the sentiment changed later in the day “after Russian President Vladimir Putin said a potential energy cooperation deal between Moscow and Washington could boost his country’s fuel flows to Europe,” as reported by Bloomberg. “Benchmark gas prices in Europe fell as much as 5% after Putin’s remarks, before closing little changed.”

The carbon market opens with falling prices on Friday morning but we could easily see the upward trend resume later in the day. The overall sentient on the energy-related markets is still nervous with geopolitics still in focus. “As seen many times before, when President Putin speaks about energy it has an instant impact on European energy markets,” warns consultant firm Auxillione in a note this morning.