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EU carbon rises 8 pct on strong energy prices

LONDON, March 25 (Reuters Point Carbon) – EU carbon prices rose 7.7 percent in thin trade on Monday as a strong energy complex helped to offset weak demand at an EU auction of 3.6 million permits, traders said.

EU Allowances for delivery in December closed at 4.47 euros, up 32 cents on Friday’s settlement after briefly touching a three-week high of 4.59 euros.

Around 24 million EUAs of all vintages changed hands, including government auction volume, compared with a daily average so far in 2013 of around 34 million EUAs.

“There is a bullish energy complex and an absence of sellers. In this low liquidity it doesn’t take much to move the market,” a trader said.

The 2014 baseload German power contract traded at 41.24 euros/MWh on EEX, up 52 cents on Friday’s close, on the back of
strong UK gas prices that remained over 100 pence per therm for the day-ahead contract.

UK gas prices have soared in recent days, pushed higher by colder weather, supply disruptions and low levels of stored gas.

Earlier in the session, the European Union sold 3.5875 million phase three spot EUAs at 4.10 euros on German bourse EEX.

The sale attracted bids for 6.4 million units, giving it a bid to offer ratio of just 1.79, the lowest subscription rate for an EU auction this year.

“There might have been a weak auction result today, but it doesn’t really reflect the fact people don’t really want to sell,” a second trader said.

He said Monday’s activity marked a continuation of bullish buying seen last week, as traders sought to close out short positions on the back of optimism that the European Commission’s plans to prop up prices would succeed.

“There is a carry through of the short covering from last week, and its being supported by the other energy contracts,” the second trader said.

Carbon prices rose after Hungary, Lithuania and Slovenia last week threw their weight behind a proposal to withhold 900 million allowances from the EU Emissions Trading Scheme over the next three years.

In the secondary market for U.N.-backed carbon credits, the Dec-13 CER contract gained 2 cents to 33 cents.

By Susanna Twidale – susanna.twidale@thomsonreuters.com

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