The benchmark European carbon contract soared to nearly an eight-week high following news of potential European Union market reform, and technical purchasing drove the contract through resistance levels of the past few weeks.
The Russian invasion of Ukraine in February has caused significant volatility in energy market, prompting carbon credit investors to offload their EU allowance positions. Following that, the benchmark European carbon contract plummeted to 58 euros in March.
However, fueled by several positive news, the EU carbon price surged 9.5% from Tuesday’s level, closing at 87.82 euros per tonne and reached its highest level since the Russian-Ukrainian conflict.
The surge in carbon prices might be due to last-minute compliance purchasing, as the deadline for reporting emissions for 2021 is approaching on April 30, according to Vertis analyst Bernadett Papp. Furthermore, Wednesday's price gain and higher trading volume also suggested some market speculators may have re-entered the market.
A close around 87 euros per tonne is a strong technical signal for bullishness ahead, said Papp, pegging new support levels at 82 and 80 euros.
On top of that, a draft on European carbon market reform was voted by the Energy and Industry Committee of the European Parliament on Wednesday. A narrow majority of the committee agreed to curb the role of speculative investors in the EU ETS. According to Papp, the news is also a support for the price.
“With gas prices easing over the past few days, we are seeing carbon now breaking out of a neutral technical zone which was capped at 82 euros per tonne,” Greenfact analyst Marcus Ferdinand said.
He added that this is likely to prompt some market participants, who have been biding their time following the upheaval as a result of the Russian invasion, to build up fresh positions.
Due to the Easter break, there was no European Union permit sale on Monday. Around 7 million permits will be offered at auctions this week, down from roughly 10.8 million last week.
