European Union emission permits advanced to the highest in seven weeks on speculation that crude oil’s surge to a two-year peak may spur demand for carbon allowances.
Carbon for December gained as much as 3.7 percent to 4.72 euros ($6.31) a metric ton on London’s ICE Futures Europe exchange. The contract closed up 1.5 percent at 4.61 euros a ton, the highest since July 3.
West Texas Intermediate crude rose as much as 3 percent in electronic trading on the New York Mercantile Exchange, its highest since May 2011, on concern that conflict in Syria may threaten oil supplies from the Middle East. Higher oil prices can influence the price of coal and natural gas, which in turn can affect demand for carbon permits.
“Carbon is being boosted by the jump in energy prices,” Milan Hudak, an analyst at Virtuse Energy sro in Prague, said today by e-mail. “Yesterday’s close above 4.50 euros gave the market an impetus to rise further this morning,” he said, citing resistance at the contract’s highs reached earlier this month.
Carbon closed yesterday at 4.55 euros a ton, 5 euro cents higher than a Fibonacci retracement level of carbon’s jump from 3.25 euros to 4.88 euros in early July. Fibonacci analysis is based on the theory that securities tend to rise or fall by set percentages after reaching a high or low, creating areas where buy or sell orders may be gathered.
“Traders were expecting that a break above the down-trendline would push prices a lot higher,” said Fred Payne, a carbon trader in London at CF Partners (U.K.) LLP, an investment firm specializing in renewables and commodities. “What we saw this morning is that playing out.”
Today’s high price of 4.72 euros also corresponded to the 200-day moving average for the December contract, which may have capped the morning increase, according to Krzysztof Piatek, a trader at Vertis Kornyezetvedelmi Penzugyi zrt in Budapest.
Carbon slumped to a record 2.46 euros a ton on April 17 as the euro-area’s longest recession curbed demand, exacerbating an oversupply of permits. EU member states are considering a carbon-market rescue plan to reduce the surplus after the European Parliament backed it in July.