LONDON: European carbon prices were poised to end the week almost flat after buyers stepped in to lift prices from six-week lows and restore optimism that supply curbs would drive further gains.
By 1547 GMT, front-year EU Allowances were up 4 cents at 6.03 euros ($7.75) a tonne, little changed in a quiet session with barely 5 million units changing hands.
The benchmark carbon contract has crept above 6 euros in steady trade that traders said had restored confidence since prices tumbled to as low as 5.76 euros after a bout of technical selling on Tuesday.
The contract is still on course to end the week almost in line with the previous Friday settlement of 6.06 euros. "We've seen buying step up since we had that bottom and we've turned a corner now," said one trader.
"The lower auction volume is the key, if it wasn't for backloading there's nothing out there to be bullish about," he said, referring to the EU's programme to halve near-daily auction volumes for the next three years.
He said the effect of backloading had diminished as weak economic growth and warmer weather had dampened energy consumption, hitting demand for carbon allowances.
Analysts at environmental campaigners Sandbag said on Friday that the warmer weather and a large increase in renewables capacity would mean power sector emissions in 2014 will fall 7 percent year-on-year.
They said this will drive a 4.4 percent fall in total emissions covered by the EU Emissions Trading System (ETS), a bigger drop than the 3 percent fall recorded last year.
There were mixed signals from the energy complex as German baseload prices for delivery in 2015 TRDEBYZ5 gained as much as 15 cents to 35 euros/MWh.
But further along the curve, profit margins for some of Germany's least efficient coal-fired power plants were poised to end the session at their lowest levels for a week.
Narrowing margins for generating electricity from burning coal could make it less attractive for utilities to sell power in forward contracts, decreasing their demand for carbon allowances.
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