EU carbon prices crept back above €5 on Thursday after a strong auction set a bullish tone in a relatively becalmed session that defied losses in oil.

The Dec-15 EUA contract settled up 21 cents at €5.08 on ICE, near the top of the day’s €4.75-5.09 range.

Turnover was fairly thin at just over 15 million units, down on Wednesday’s volume of 18 million and levels north of 20 million earlier in the week.

“Prices rose after a fairly strong auction and held up at €5 the rest of the day. It’s encouraging that carbon held its ground even as oil fell away in the afternoon,” said one broker.

Today’s gains put carbon within 10 cents of last week’s settlement. EUAs had fallen to within 5 cents of the 22-month low of €4.62 on Wednesday amid fears that cash-strapped industrials would sell their newly-acquired 2016 free allocation.

“Those industrials are comparatively small so we would need to see a great deal of selling for them to have an effect on the market, and I haven’t seen much at this point,” the broker added.

The secondary EUA market was relatively stable around the EU’s auction, which cleared at market at €4.78 – the first time in almost two weeks that a sale has not cleared at a discount.

It had bid coverage of 1.98, below the 2.50 average of the rest of the week and the 2.21 year-to-date average.

German clean dark spreads narrowed slightly as lower coal and power prices outweighed the rise in carbon to give a slightly bearish signal for utilities.

Coal was dragged lower by falling oil, which shed more than 3% as data showed stockpiles at the US hub in Cushing were at record highs. Front-month Brent crude was down as much as $1.12 to $33.29 a barrel.

By Ben Garside – ben@carbon-pulse.com