European carbon prices rose by 1.4% on Wednesday on a mix of speculative and compliance buying, as technical support built below the €8 level and traders returned from holiday.

Front-year EU Allowance futures ended up 11 cents at session high of €8.13 on ICE Futures Europe.

Volume on the benchmark contract was strong at 15.7 million units traded.

“It looks like a spec-led move higher with one big buyer squeezing things,” one trader said.

“There are no material changes in the market, so it’s slightly premature to expect a larger rise from these levels,” he added, noting that in the past two days strong buying interest had helped Dec-15 prices bounce back each time they fell below €8.

The futures opened Wednesday at €7.99 and traded down to their intraday low of €7.96 before climbing back.

A burst of activity following a non-descript UK auction then sent prices up above €8.10 by 0911 GMT, which is where they stayed for most of the remainder of the day.

The UK government sold 3.123 million spot EUAs for €8.00 each, which was some 3 cents under market at the time the sale ended.

The auction attracted bids equivalent to a total 9.06 million units, making it 2.9 times oversubscribed, which was the lowest level since Aug. 7

Another dealer said activity amongst compliance buyers was picking up this week, as many participants were back at their desks following the summer holidays.

Volume down the rest of the EUA futures curve was also busy on Wednesday, with some 4.3 million units changing hands on the contracts for expiry in December 2016 or later.

Additionally, some 5 million units were transacted on the spot-Dec15 spread, which several traders attributed to ICE waiving the fees on the spot leg of time spread trades from Sep. 1.

Meanwhile, front-year CER futures ended the day up a cent at 52 cents – their highest settlement since April.

By Mike Szabo – mike@carbon-pulse.com