Yesterday, the European carbon market extended its rally for an eighth consecutive session. The EUA Dec-26 contract reached an intraday high of €93.80—its highest level since June 2023—but failed to sustain the gains and settled at €92.24, marking a daily increase of 0.46%.

Also notable in yesterday’s session was trading activity, with volumes reaching 41.5 million allowances—the highest since mid-December, when activity was elevated ahead of options and futures contract expiry. Compared with last year’s average daily volume of 28.7 million allowances, this surge in trading reinforces the view that the upward price move was backed by strong conviction and underlying fundamentals.

A key factor behind yesterday’s rally was “driven by another cold snap forecast for large parts of Europe towards the end of this month,” according to ING analysts, with TTF gas prices extending their winning streak to an eighth consecutive session and settling 4.2% higher.

Yesterday’s auction was also supportive, with a clearing price of €91.32, trading above the secondary market at the time. After a three-week pause, EUA auctions resumed last week, with around 14.5 million EUAs sold to buyers since then. “Rather than dampening sentiment, auction supply has been comfortably absorbed by the market, reinforcing the prevailing positive trend,” according to Belekron.

The rally continued into Friday morning across both gas and carbon markets, as temperatures in Europe are expected to fall a few degrees below seasonal norms next week, before even colder conditions set in toward the end of the month, according to SMHI, as quoted by Mind Energy.

Furthermore, the global LNG market is becoming increasingly tight amid geopolitical tensions involving Iran and cold waves across large parts of Asia. Adding to supply concerns, key LNG export facilities along the Texas Gulf Coast have been operating below normal levels this week due to technical issues. “LNG export flows from the US, the world’s largest exporter, slipped to a two-month low,” according to Trading Economics.