Volatility subsides with volume over a quiet week

October 2, 2017 by Ronjoy Bezbarua

CaliforniaCarbon.info, September 25, 2017:

Weekly price range for California carbon allowances (CCAs) traded on the InterContinental Exchange (ICE) narrowed after experiencing three weeks of peak intra-day volatility, but the fluctuations still remained notably higher compared to the pre-AB398 market. This is congruent with our analysis that the market trend has permanently deviated from the previous norms due to participants capitalizing on the current market surplus.

In terms of prices, the current front, which stood at USD 15.22 on Friday, saw price movements in the range of USD 0.06. Despite the higher market movement, the momentum remained neutral with a decline of USD 0.01 as compared to the previous week’s closing price. The current benchmark also lost of USD 0.01 for the week. A total of 3,353,000 tons traded for the week, out of which 1,615,000 tons were traded when the prices were declining. Of the remaining 1,738,000 tons, 853,000 tons were traded on Tuesday when prices were USD 0.01 lesser than the previous weekly closing prices (USD 15.20). The year ahead funding rate, for the first time since April 6th, crossed the 2.6% threshold and reached 2.62%.

The V2017 contributed to the majority of last week’s trading activity with 2,642,000 tons (78.8%). The V2019 traded 250,000 tons (7.46%) while the V2016 and the V2018 traded 210,000 tons (6.26%) and 200,000 tons (5.96%), respectively. The V2015 traded a relatively low 50,000 tons (with a contribution of 1.49%) while the V2020 traded just 1,000 tons on Tuesday, trading for the first time since 15 September 2017. Delivery-wise, trading was concentrated on three months – Dec17 (64.81%), Dec18 (18.79%) and Sep17 (11.93%), while a small portion traded on Mar18 (2.98%) and Oct17 (1.49%).

Open Interest had an overall net positive change of 760,000 contracts as we saw new contracts on the following deliveries: Oct17 (50,000 contracts added), Dec17 (605,000), Mar18 (100,000) and Dec18 (5,000). In terms of vintages, 90,000 contracts were diluted on the V2019 while the V2017, V2018 and V2020 saw 834,000, 15,000 and 1,000 new contracts, respectively.

The Ontario carbon market, continued to experience major gains in prices, despite a comparatively minor dip on Thursday. OCA front and benchmark prices now stand at CAD 18.91 and CAD 19. The current benchmark had a weekly gain of CAD 0.23. As seen since 21 June, no trade or any change in open interest was observed.

Ronjoy Bezbarua (ronjoy.bezbarua@californiacarbon.info)

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