Flat price fall as market settles on true clearing price

March 14, 2016 by Rohan Nongpiur

CaliforniaCarbon.info, March 14, 2016: This week the exchange saw the low traded volume of 2,717,000, well below the historic year weekly median value of 6,747,000. The vast majority of this: 2,086,000, occurred singularly on the front of V2016 on Thursday. The remaining 23% of the week’s volume was split fairly evenly between the 2015, 2016 and 2017 vintages; the current taking the predominant share as is usual. In terms of delivery dates, no trading whatsoever was transacted past December 2016. In general, this week’s trading activity looks fairly non-descript.

Open interest increased this week by 2,094,000 contracts, thus giving a high creation ratio of 77%. The major portion of this, 1,874,000 new contracts, came from Wednesday’s aforementioned heavy trading on the front. Moreover, it would seem that this front trading was transacted significantly beneath the previous market price; Wednesday saw all the second compliance period vintages (V15-V17) lose $0.05 across all deliveries. Given the volume weighting for daily prices on the exchange, this front trading looks to be the only available driver for prices dropping through the forward curve.

More generally, the whole index fell flatly by $0.10 for the week after steady midweek price falls. There were no relevant meetings or workshops from ARB last week; however, there is a board meeting on the Thursday – although its agenda seems largely irrelevant for the cap-and-trade market.

Harry Horner – (harry@californiacarbon.info)

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