European carbon prices dipped further below €5 on Thursday in a quiet session that failed to react to strong demand at a government auction.

The front-year EUA futures settled down 7 cents at €4.90, at the upper end of the day’s €4.77-4.98 range on modest volume of 12.5 million units.

While prices have barely budged in their recent daily closes, days, the Dec-16 contract’s intra-day low has also dipped over the past three sessions to edge progressively closer to the 22-month low of €4.62 hit twice last month.

A group of 25 EU member states sold 3.425 million spot allowances for €4.88 each in an auction that cleared 3 cents above market, which was the highest premium seen since Feb. 12.

Some 22 participants submitted bids totalling 8.24 million units, the most in seven sessions.

The mood was far from bullish among market participants at the Argus Emissions Markets conference in Amsterdam, which heard that regulators have no plans to table further market fixes and have little appetite to deepen their emissions goals.

Meanwhile, EU governments have completed 71% of the 2016 free EUA allocations, according to a European Commission update published after market close.

This outstanding allocation could weigh on the market as it means there remains the prospect that some cash-strapped companies from southern Europe could sell upon receiving their annual handout.

Other market watchers said that there were several large companies that still need to buy “millions” of EUAs ahead of the Apr. 30 compliance deadline to cover 2015 emissions.

“It is likely that this buying interest is underpinning the market at the moment,” said Margaret-Ann Splawn of Redshaw Advisors in a note to clients.

German clean dark spreads were little changed as the effect of higher coal prices was cancelled out by gains in power prices, a stronger euro, and weaker carbon.

By Ben Garside – ben@carbon-pulse.com