The December 09 EUA contract was last seen changing hands up EUR 0.40 at EUR 14.40/t on the ICE /ECX platform, almost EUR 1.50 up from a week ago.

Meanwhile, Brent North Sea crude oil for August delivery hit a low of USD 59.61/bbl on the ICE platform on Monday morning, about USD 4 lower week on week.

“CO2 is running completely opposite of oil lately,” said HVB trader Roman Richter in Munich.

The latest gains in the CO2 market were probably a result of short-covering as players were buying back allowances when the price reached a certain level, said Richter.

Krümmel impact
Furthermore, last week’s shutdown of the Vattenfall operated Krümmel (1,260 MW) plant had triggered buying of CO2 allowances by utilities, which were forced to rely on more polluting coal-fired generation to compensate for the outage, said trader Eric Boonman at Fortis Bank, adding this practice had continued into this week as the facility remained out of action.

Some of the price increases seen over the past week were also impacted by Thursday’s EUA auction in the UK, which turned out at a higher price level - EUR 13.38/t - than expected, added First Climate trader Dennis Mignon.

“By habit, people went short ahead of the auction and had to cover these positions afterwards,” he said.

Finally, many players were shifting their positions from the Bluenext spot market to the forward market after having lost confidence in the French exchange in the aftermath of suspected VAT fraud in June, Richter said.

Direction unclear
The December 09 contract would trade in a EUR 15-16/t range and remain decoupled from oil until volumes started to pick up again after the summer holidays in September, said the Austrian trader.

Meanwhile, Richter expected carbon to trade in a EUR 13.50-14.50/t range in the coming week, he said.

Weak oil and equities were currently putting a lid on carbon’s upward movement, but if oil turned, December 09 could test EUR 16/t, added Mignon.

Short-covering is where a trader purchases securities in order to close an open short position. This is done by buying the same type and number of securities that were sold short.


Source: Montel Powernews