European carbon prices climbed back to end steady after dipping to touch a new one-month low for a second day, as a strong auction and a bullish energy complex and euro supported.

The Dec-15 EUA futures on ICE settled a cent lower at €8.40 on strong volume of 17.3 million units – most of which was linked to position rolling, as the front-year contract expires next week.

The futures slipped to as low as €8.33 in early trade, but prices climbed back in the afternoon, spurred by gains in German power prices, falling coal prices, and a rising euro.

The euro broke above $1.10 for the first time in over a month, as drooping commodity prices are prompting investors to unwind bets on commodity-linked currencies that were funded with borrowed euros.

The firmer euro caused coal forwards, when priced in the currency, to tumble to their lowest in over a decade, with the 2016 ARA contract on ICE falling below $41/tonne, and the 2017 and 2018 forwards both sliding below the psychologically key $40/tonne level.

And with German baseload power prices gaining a few cents each, it bolstered the clean dark spreads by between 7.5% and 13% each, sending them to elevated levels not seen in more than a month.

A well-bid UK auction also supported EUAs.

In its final sale of the year, the country offloaded 3.123 million spot EUAs for €8.35 each, some 2 cents above the market at the time the auction ended.

Bidding interest from the 16 participants totalled 6.7 million allowances, which was the most for a UK auction since late September.

A group of 25 EU nations will on Thursday sell 2.918 million units, part of the 14.75 million allowances still to be sold by governments in the final five auctions of the year.

Meanwhile, front-year CER prices dropped by 2 cents to a two-month low of €0.56, as the strong demand seen earlier in the quarter continued to wane.

By Mike Szabo – mike@carbon-pulse.com