EU carbon prices rebounded to close above €8 on Tuesday after a government auction drew the highest subscription rate since June 29.

The Dec-15 EUA contract settled flat at €8.03 for the second consecutive session on ICE despite spending much of the session below the psychological support mark of €8.

The benchmark contract saw healthy volume of over 13 million units as it traded in a €7.95-8.04 range, well below the 2.5-year high struck last Thursday and showing little sign of meeting analyst projections of further gains this week due to upcoming cuts to auction supply.

Volume was also healthy further along the EUA curve on ICE, with the Dec-16, Dec-17 and Dec-18 seeing turnover of over 4m, 3m and 2m respectively.

Traders said selling by speculators seeking to take profits made during last week’s rise was offset by buyers keen to secure enough allowances ahead of an August auction slowdown.

“For two days there have been sellers out there, but that volume is being picked up quite comfortably,” said one trader.

Prices were little changed immediately after the EU’s sale of 2.918 million spot EUAs cleared 2 cents below market at €7.95. The auction recorded a bid-to-cover ratio of 3.7, the highest for an EEX-hosted sale this month.

Tomorrow, EEX will host a rare sale by Poland of 2.854 million spot EUAs, with the auction window open from 1100-1300 GMT.

Some 14.8 million EUAs will be auctioned this week but volumes will halve next week and throughout August in a scheduled reduction to account for reduced summer activity.

German clean dark spreads for 2017 and 2018 dipped as power prices fell and a weaker euro offset a drop in coal, damping the signal for utilities to buy carbon.

Meanwhile, front-year CER futures gained a cent to settle at €0.47, extending the previous session’s two-month high on volume of 367,000 units.

By Ben Garside – ben@carbon-pulse.com