European carbon prices tested their 2015 high in speculator-driven trade on Monday, but closed in the red after the buying momentum ran out of steam.

The Dec-15 EUA futures trading on ICE Futures Europe ended 5 cents lower at €8.30 on volume of just under 11 million units.

The front-year contract hit an intraday high of €8.43 – the year-to-date high first touched on Aug. 20 – after buyers pushed the price above last week’s peak of €8.38 shortly after 1000 GMT.

But the EUAs failed to scale new heights and that led to some profit-taking, which sent prices back down towards Friday’s settlement.

The majority of Monday’s volume on ICE was done as outright trades on the Dec-15s, suggesting that the day’s moves were mainly speculator-led.

Just 10% of the total ICE EUA turnover was transacted on the later-dated futures, and coupled with comparatively few spread trades likely meant there were few utilities on the bid today.

Shortly after the Dec-15s had tested their 2015 high, German bourse EEX warned participants that it was experiencing a rare “fast market” for its spot EUAs, meaning it was witnessing high price fluctuations within a very short period of time.  However, the situation returned to normal shortly thereafter.

The morning’s buying run came despite an EU auction for 2.918 million spot units that attracted the fewest bids in two months.

The sale featured bidding interest equivalent to just 6.03 million allowances, and cleared at €8.26 or 5 cents below the secondary futures market, which was the largest discount seen since Sep. 24.

Analysts noted that the front-year EUAs were approaching the their RSI “overbought” level, and may need to take a breather at current levels before attempting to breach €8.43.

“EUA prices … are likely to consolidate amid mixed signals. Technical outlook is neutral given that the bullish momentum seems to run out of steam with early overbought signs and prices near the upper Bollinger band,” said analysts at Thomson Reuters Point Carbon.

Bernadett Papp with Budapest-based Vertis said that after topping the €8.43 resistance levels, “the space is open for further gains, but the €8.50 level might halt the rally,”

“On the other hand, it might be worth mentioning that after a short-lived rally in the first half of last week, the 30-day moving average halted gains in the front-year German power which turned back south again. The pattern is similar in the European 2016 gas price as well,” she added.

“These, combined with the weekly auction volume, which will be some 3 million higher than last week, might exercise a pressure on the price of the benchmark carbon contract this week.”

Governments are due to sell a total 15.08 million units this week, up from 11.95 million last week.

However, analysts noted that plumper clean dark spreads could offset the increase in EUA supply.

German clean darks remained near last week’s elevated levels on Monday thanks to lower coal prices and a firmer euro.

ARA coal forwards for delivery next calendar year resumed their downward slide, falling back below $49/tonne – within sight of multi-year lows.

German baseload power trading on EEX also fell by around 1% across the board.

“With (EUA) prices having moved higher it seems to be a matter of when, not if, a new high for the year is set. With further long-term price rises forecast it is becoming more and more unlikely that industrial participants will rush to sell any excess volume,” said Redshaw Advisors in a note to clients.

“Given Backloading’s consistent removal of supply since 2014 and the market’s continued rejection of bearish influences, further gains are on the cards with volatility really only coming from short-term events related to the clean dark spreads.”

By Mike Szabo – mike@carbon-pulse.com