European carbon prices continued their march upwards, extending recent 2.5-year highs as utility and speculator buying was met by a dearth of selling, traders said.

Front-year EU Allowances futures trading in ICE Futures Europe settled up 12 cents at €8.09, after touching an intraday high of €8.15, the loftiest level since Nov. 2012.

Volume was very strong with 24.1 million units traded on the benchmark contract, and a total 37.2 million EUAs changing hands across all vintages.

Some 20 million of that was done over the ICE’s screen-based contracts, while 13.3 million went via block trades and the remaining 4 million on EFP in what appeared to be a 2-million unit spread trade between the Dec-15s and 18s.

“I think it’s a mix of spec and utility buying, and an absence of selling is creating a vacuum and pulling prices higher,” one trader said.

A broker said some of his industrial clients, most of which are sitting on a surplus of permits, are waiting for prices in excess of €9 before they consider selling.

Dwindling free allocations coupled with reduced overall supply in the coming years is prompting many manufacturers to choose to hold on to their allowances rather than sell them at prices where they would have in years past.

Another trader predicted some industrials will emerge once prices start to come down from current levels, adding that technicals are pointing to an overbought market.

The Dec-15 futures’ Relative Strength Index (RSI) neared the 70 level on Thursday, a value that indicates an instrument could be due a correction.

The past three times the front-year contract’s RSI has come within a point or two of 70, the underlying price has fallen by between 3-5% within a day or two.

Earlier on Thursday, a group of 25 EU nations sold 2.92 million spot EUAs for €8.04 each, in an auction that cleared in line with market prices and attracted bids worth a total 7.7 million units.

Meanwhile, German calendar-year baseload power prices dropped by more than 20 cents across the front three forwards contracts.

However, the impact on carbon was offset by a stronger euro and weaker coal prices, which helped firm the German clean dark spreads slightly.

Separately, Dec-15 CER futures on ICE were unchanged at 45 cents on strong volume of 570,000 units traded, while the Dec-16s slipped by 1 cent to 41 cents on turnover of 250,000.

By Mike Szabo – mike@carbon-pulse.com