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Market strengthened by auction results across the border

June 19, 2017 by Ronjoy Bezbarua

Close to 70 leading industry companies including power players like international oil company, Neste, to Southern California Edison to Tesla Motors to the Silicon Valley Leadership Group came out in strong support of the cap-and-trade program and its extension to 2030 last week. They reiterated that the program was working well and driving job growth across California. So far insulated from the Trump administration, discussions surrounding the program’s design post-2020 continue to heighten as Gov. Brown pushes ahead with securing the two-thirds majority vote required to classify the program’s auctions as a legal tax.

Moving on to trading activity, the CCA market saw significant recovery across all fronts last week after a slight blip in the market the previous week. The current front contract, Jun 17, rose by USD 0.09 through the week, closing on Friday at USD 14.15. Further down the forward curve, the Dec 17 benchmark contract climbed by USD 0.08, clearing at USD 14.33 at the end of play on Friday.

With price charts emphasising a stronger bid demand, healthy volumes cleared the exchange over the week. 5,711,000 tons were traded in total, concentrated on 2017 vintages (64.3%) and 2018s (35.37%). For the third consecutive week, the Jun 17 contact was the most traded of the options with 1,665,000 tons changing hands. The Dec 18 contract followed closely with 1,520,000 tons of trade.

Open interest creation was down from the previous week. The week observed a net change of 2,706,000 contracts. The Sep 18 and Dec 18 contracts saw the highest increase with net changes of 925,000 and 750,000 contracts respectively.

OCA prices read two different stories last week, depending on the colour of the currency. CAD prices dropped significantly on the first few days of trading and since recovered slightly towards the end of the week. Prices closed at CAD 18.96, an increase of CAD 0.24 to the auction clearing price of CAD 18.72 which was announced on Tuesday (link). With the exchange rate in favour of the CAD however, USD prices advanced throughout the week and based on Friday’s exchange rate closed at USD 14.33, mirroring the CCA equivalent.

 

Billy Hamshaw (billy@californiacarbon.info)

Ronjoy Bezbarua (ronjoy.bezbarua@californiacarbon.info)

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