Carbon allowances for December 2018 delivery under the EU Emissions Trading System surged around Eur1/mt intraday Wednesday on the ICE exchange to a five-year high of Eur12.49/mt.
* December 2018 EU Allowances hit Eur12.49/mt
* Up almost Eur1/mt intraday on ICE
* EUA strength lifts European forward prices
Annual verified CO2 data for 2017 was scheduled to be released by the European Commission on April 3. The figures provide a once-a-year snapshot of regulated CO2 emissions in Europe, a key indicator of annual demand for allowances.
VIEWS FROM THE MARKET
Traders have been unable to point a finger at exactly what triggered the rally, which started after Tuesday's morning auction.
Fundamentals did give away any reasons for the sudden surge, they said.
"11 out of 22 bidders got to buy in the Tuesday auction, and those who did not get to buy started afterwards to buy [at the exchange]. Volumes were not that high though", a trader said, adding that when prices started to rise, "it might have caused a snowball effect in the market with people trying to jump on the train."
Another trader said: "It is just a buying frenzy right now. According to the chart analytics it should stop at Eur12.90/mt, otherwise it could go up to Eur17/mt. These are the significant price thresholds traders look at the moment."
An analyst said: "The market has left us scratching our heads today. We do not know where all this demand may be coming from, taking into account that utilities are not hedging aggressively as far as we know at the moment. We have thought that the announcement of the UK staying in the EU ETS until the end of the phase may have played a role in today's spike."
Liquidity was not high, a broker said, but traders were closing positions. "Nobody knows why [the market moved] but I do see that some stops have been taken...some people were short closing their position in EUA trading but also regarding year-ahead power prices."
EUROPEAN POWER CONTINUES RALLY ON EUAs
European far curve power prices have surged in line with EUAs, additionally supported by stronger coal, traders said.
German Calendar 2019 baseload was trading at Eur35.20/MWh at midday London time, up 50 euro cent/MWh from the S&P Global Platts assessment on Tuesday and the highest level since the end of January.
The French Calendar 2019 baseload contract once again breached Eur40/MWh, reaching an intraday high of Eur40.40/MWh to be near a two-month high.
According to Platts data, the Calendar 2019 base was previously assessed at Eur40.40/MWh on January 26.
The sudden price movement in EU carbon has drawn attention from the whole energy market with coal traders also starting to keep a close eye on allowance prices, sources said.
