EU carbon prices briefly sneaked above the psychological resistance level of €8 on Tuesday, but fell back ahead of the day’s auction and ended close to support levels.

The benchmark Dec-15 EUA contract settled down 5 cents at €7.91 on ICE Futures Europe, at the bottom of the day’s €7.91-8.01 range on a thin 6 million turnover.

The front year futures now stand within reach of the €7.90 level that technical analysts and traders have pegged support at, warning of the possibility of a further correction should prices dip below that this week.

Dollar-denominated coal prices rose in step with rebounding oil, helping to narrow the 2017 and 2018 German clean dark spreads slightly. The 2018 spread is at its lowest since July 1, damping the incentive for utilities to buy carbon.

The EU auction of 1.46 million spot EUAs cleared at €7.94, the same level as prices in the secondary market, with a bid-to-cover ratio of 4.21, above both Monday’s 2.5 subscription rate and the year’s average of 3. Secondary prices were little changed following the sale.

The auction matched Monday’s entry of 13 bidders, below the average of 17 this year, suggesting the market has adjusted downwards for the lower August demand.

Below are the sales this week, distance to market, bid-to-cover ratios:

8/3/2015              EU          1,459,000             -€0.01 v market, btc 2.5

8/4/2015              EU          1,459,000             €0.00 v market, btc 4.21

8/5/2015              UK          1,564,500

8/6/2015              EU          1,459,000

8/7/2015              DE           1,599,000

By Ben Garside – ben@carbon-pulse.com