Yesterday, the European carbon market gave back Tuesday’s gains, with the benchmark Dec-26 contract settling €0.60 lower at €81.71. The move leaves EUAs trading broadly around the €82/t level, where prices have remained largely range-bound over the past month.

The most notable development in yesterday’s session was the pickup in trading activity, with volumes reaching 17.6 million allowances, around 14% above August’s daily average of approximately 15.5 million allowances.

The increase in volumes could reflect positioning adjustments following yesterday’s publication of the Commitment of Traders report and the expiry of August options, rather than a broader return of participants from the summer holiday period. 

Despite the approaching compliance deadline, there are still few signs of a meaningful acceleration in compliance-related demand, leaving EUAs without a strong fundamental catalyst to break out of their recent range.

European natural gas prices also moved lower yesterday, with the TTF front-month contract retreating from recent multi-month highs. However, the decline did little to ease concerns over the broader European gas outlook.

Fundamentals remain relatively tight, particularly given the slow pace of storage rebuilding. According to Gas Infrastructure Europe, EU gas inventories currently stand at just 61.61% of capacity, around 13 percentage points below the level seen at the same time last year and the lowest seasonal level since records began in 2011.

In early trading on Thursday, the European carbon market continued to edge lower, although significant price moves in either direction seem unlikely this morning. Meanwhile, European gas prices resumed their upward trend, with the TTF front-month contract reaching levels last seen in March. Nevertheless, the carbon market is likely to remain largely driven by its own dynamics rather than taking a clear directional cue from gas.