EU carbon prices fell sharply to as low as €8.13 on Friday, cancelling out a week of gains as traders looked to take profits from units bought at lower levels.

The benchmark Dec-15 EUA settled down 17 cents at €8.20 on ICE after dropping 10 cents within a few minutes when prices slipped below a support level at €8.30. Turnover was higher than for much of the month at 11 milllion.

“I think some people just decided to get out today, they’ve had a good run up that probably went better than expected, and we haven’t gone much further this week so they figure take the profit now,” one trader said.

Carbon reached a new 33-month peak of €8.43 on Thursday after extending last week’s mark over two consecutive sessions but struggled to hold any further ground on last week’s €8.36 settlement.

The big rise came last week, when carbon gained 54 cents as speculators bet that the market could sustain an upward move while auction supply is half the usual due to a scaled back August sales calendar.

But as a return to regular auction levels looms in two week’s time – when weekly sales volume will double to 12 million – some traders suspect a further price drop will be inevitable and expect prices to fall well below €8 again, even to as far as €7.60-7.70.

August turnover has been down at around 60% of normal volume on all major platforms as many traders are away from their desks.

STRONG AUCTIONS

Despite the low secondary market turnover, auctions this week have consistently attracted stronger-than-average demand for their curtailed offerings.

Though Germany’s auction of 1.599 million spot EUAs on Friday signalled slightly weaker demand than others this week.

It cleared 1 cent below market and with the week’s lowest subscription rate of 3.13, albeit still above the year’s average of 3.

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

8/17/2015        EU       1,459,000        +€0.01 v market, btc 4.12

8/18/2015        EU       1,459,000        -€0.02 v market, btc 4.20

8/19/2015        UK      1,564,500        +€0.03 v market, btc 3.25

8/20/2015        EU       1,459,000        +€0.01 v market, btc 3.82

8/21/2015        DE       1,599,000        -€0.01 v market, btc 3.13

Next week’s scheduled sales:

8/24/2015        EU       1,459,000

8/25/2015        EU       1,459,000

8/27/2015        EU       1,459,000

8/28/2015        DE       1,599,000

By Ben Garside – ben@carbon-pulse.com