LONDON - The benchmark contract for European Union carbon emissions futures on Tuesday tripped back into negative territory after prices rose to near a seven-month high in early trade, traders said.

EU Allowances for December delivery fell 17 cents or 1.15 percent to 14.59 euros ($21.71) a tonne at 1316 GMT, after touching a high of 14.93 in the first hour of trade, their highest since October 22.

The Dec-09 contract has been overbought and the contract will correct itself toward a resistance level of 14.24 euros, traders said.

The medium term outlook is still bullish and there could be new positions built around the 14.24-14.35 euro level, an emissions trader said.

Good news flow from the climate summit this week could cause prices to increase further toward 15 euros.

However, any signs of difficulty in the negotiations after initial enthusiasm has subsided could make prices consolidate below 14.50 euros, carbon analyst Emmanuel Fages said in a note.

EUAs' recent rally has been attributed to a number of factors including bullish enthusiasm at the start of climate talks in Copenhagen, firmer gas and German power prices and stronger employment data from the United States last week.

The rally has been largely driven by the options market, as there was a great deal of open interest on the 15 euro call option ahead of contract expiry on Wednesday, said James Emanuel at brokers CantorCO2e.

German Calendar 2010 baseload power on the EEX was down 25 cents or 0.57 percent at 43.70 euros per megawatt hour.

Oil fell below $74 a barrel on Tuesday after a near 2 percent fall the previous day, pressured by the slow recovery in energy demand and ample supplies, as well as a firmer dollar.

U.N.-backed certified emissions reductions (CERs) were down 20 cents or 1.46 percent at 13.50 euros a tonne. The EUA-CER spread widened to 1.09 euros on Tuesday.

The re-instatement of SGS on Friday will lead the CER-EAU spread to slightly widen (up to 1.20 euros), even if most of this movement should happen after the futures contract expiry date on Friday, said Fages.

A U.N. climate panel on Friday lifted a suspension on emissions verifier SGS UK, one of the biggest players in the $6.5 billion carbon offset market, the panel's chairman Lex de Jonge told Reuters.

(Reporting by Nina Chestney; Editing by Keiron Henderson)