European carbon prices ended steady on Tuesday in the face of falling German power and a weak auction, recovering from a one-month low touched earlier in the session.

Front-year EU Allowance futures settled unchanged at €8.41 on ICE, with a heavier-than-normal 25.7 million units changing hands.

Most of the volume was linked to position rolling, as the futures expire next week.

The benchmark contract hit an intraday bottom of €8.35 shortly after the result of Tuesday’s EU auction was published, a level aligned with the futures’ lower Bollinger Band.

Breaking below that level shows technical weakness that could lead to more losses, and traders warned that Wednesday could bring more volatility as ICE’s EUA and CER options contracts are due to expire.

A group of 25 countries sold 2.918 million spot EUAs for €8.33 each, in a sale that cleared 5 cents below market – the biggest discount seen in two weeks.

It also attracted bids worth a combined 6.05 million units, which was the fewest for an EU auction in two months.

The UK will hold its final auction of the year on Wednesday, offloading its usual 3.123 million allowances.

Governments are due to sell some 17.9 million EUAs over the next seven sessions.

Meanwhile, German baseload power prices dipped while European coal prices rose. This combined to slash between 5% and 6.5% from the calendar-year German clean dark spreads.

By Mike Szabo – mike@carbon-pulse.com