EU carbon prices continued to track oil closely on Wednesday, climbing in afternoon trade after US government data showed a drop in gasoline stockpiles.

The Dec-16 EUA contract settled up 6 cents at €5.09 on ICE, near the top of the day’s €4.94-5.15 range, on modest turnover of 13 million. A further 5.6 million units traded along the ICE futures curve.

Prices hit topped out at a 7-day high of €5.23 on Tuesday before falling oil prices dragged EUAs back towards €5.

“It’s all about the oil price for carbon at the moment. There’s little else driving things,” said one trader.

Today’s peak in EUA prices came after the US weekly oil data release at 1530 GMT, with the front-year futures climbing 7 cents in the minutes following as Brent crude futures rose as high as $41.11/barrel, a 3% daily gain.

While US crude stockpiles rose in line with analyst expectations, prices shifted due to a surprise drop in gasoline inventories.

Carbon had nudged into positive territory earlier in the session after a strong UK auction, but then retreated back towards €5.

The UK’s fortnightly auction became the fifth consecutive government sale to clear at or above the secondary spot market – this time 2 cents above.

It cleared at €4.99 with bid coverage of 1.92, the highest for a UK sale this year but below the year-to-date average for all auctions of 2.22.

German clean dark spreads dipped slightly from Tuesday’s two-week highs mainly due to European coal prices following oil higher.

By Ben Garside – ben@carbon-pulse.com