European carbon allowances strengthened into the end of last week, with benchmark EUA futures settling at €80.60. The contract gained 1.45% on Friday, allowing the market to finish the week 0.4% higher than the previous Friday’s close.

Friday’s rally was likely driven by a sharp increase in gas prices, with front-month TTF futures climbing to a three-week high amid mounting concerns over developments in the Middle East and forecasts of warmer-than-normal weather across Europe.

Despite the late-week rebound, EUA futures remained confined to a narrow €2.44 trading range throughout the week, the second-smallest weekly range of the year after the €2.38 recorded in the preceding week. Trading activity was equally subdued, with just 88.1 million allowances changing hands, well below this year’s weekly average of around 140 million.

The limited price action and muted turnover underscored the market’s lack of conviction, as participants continued to await greater political and regulatory clarity ahead of the European Commission’s EU ETS review, which has been postponed from 15 July to 17 July.

The new week has started on a softer footing, with carbon prices following weakness in the gas market. Front-month TTF futures were trading lower on Monday morning after maritime trade between Iran and Qatar resumed following a roughly five-month suspension, according to Reuters, citing Iran’s commercial attaché in Doha.

Nevertheless, the latest weather forecasts indicate that temperatures could once again rise by more than 10°C above seasonal norms across parts of France and Spain this week. The renewed heatwave is expected to increase electricity demand for cooling while also raising the risk of further nuclear output restrictions in France, both supportive factors for carbon prices.

According to Montel News, French utility EDF has already reduced output at its 910 MW Blayais 1 nuclear reactor to 628 MW and warned that production cuts at its 3 GW Chooz nuclear plant are also likely as high temperatures return this week.