Barclays slashes H2 2012 carbon price outlook

* Lowers H2 2012 EUA price outlook by 28 pct

* Says downside risk more dominant in 2012

LONDON May 28 (Reuters) - Barclays analysts on Monday cut their second-half 2012 price outlook for European Union carbon by 28 percent, citing a growing supply glut and prospects of further deterioration in the EU economy.

The analysts forecast EU Allowances to average 6.5 euros ($8.13) a tonne in the second half of this year, down from a previous estimate of 9 euros a tonne.

"While there are risks on both sides, the downside risks appear more dominant this year," they wrote in a research note.

"The reason for this is likely to be that any material deterioration in the European economic outlook will be first felt in 2012 and the supply side, regardless of intervention, is going to swell as we go through the year," the note added.

Carbon prices lost around half their value last year due to Europe's slowing economy, coupled with a carbon permit supply glut estimated in the hundreds of millions.

The benchmark carbon price was trading just below 7 euros a tonne on Monday, struggling to recover from a record low of 5.99 euros a tonne hit in early April.

Barclays estimated that a further 300 million EU Allowances and 300 million international offsets will flood the market over the next nine months, particularly in the fourth quarter of this year and the first quarter of 2013.

"All of this supply will be difficult to absorb by the market, suggesting downside to prices from current levels and this holds regardless of any developments on the set-aside," the analysts said, referring to an EU debate on whether a certain number of permits should be withheld from the market after 2013.

"The issue with the set-aside is this does not physically affect the supply and demand balances until 2013, the first year the effective cap could be reduced by the set-aside," the note said, adding there may be upward pressure on prices in H2 2013.

($1 = 0.7992 euros) (Reporting by Jeff Coelho; editing by James Jukwey)