Weekly volumes reach yearly high as Mar18 delivery sees momentous interest

October 10, 2017 by Ronjoy Bezbarua

CaliforniaCarbon.info, October 10, 2017:

Weekly traded volumes on California carbon allowance (CCA) reached a yearly high last week as notable volumes on the V2017 and V2018 were moved forward to March 2018 on the InterContinental Exchange. Despite an overall trade of a massive 22,885,000 tons for the week, prices remained relatively stable and price movement was in the range of USD 0.04. The price momentum, as seen in earlier weeks, was neutral with no changes as compared to the previous week’s closing price. Similarly, the year ahead funding rates also remained unchanged as compared to last week.

The bulk of the week’s volume traded on Tuesday and was concentrated on the V2017 and the V2018 for the Dec17 and Mar18 deliveries. V17 Dec17 and V17 Mar18 traded 4,951,000 and 4,000,000 tons respectively while V18 Dec17 and V18 Mar18 traded 3,540,000 tons each. The Mar18 delivery is significant for the CCA market as it is the delivery that follows the February auction and is used to roll the influx of allowances from the auction. It is possible that the volumes mentioned above were rolled forward in anticipation of increasing spreads either from the November auctions or a hike in the federal interest rates in December.

In terms of prices, the current front, which stood at USD 15.22 on Friday, saw price movements in the range of USD 0.04. As previously mentioned, despite the higher market movement, the momentum remained neutral with no changes in prices as compared to the previous week’s closing price. A total of 22,885,000 tons traded for the week, out of which 16,681,000 tons were traded on Tuesday.

The V2017 contributed to the majority of last week’s trading activity with a significant 13,755,000 tons (60.1%). The V2018 came second and traded 7,130,000 tons (31.16%). V2019 and V2020 both traded 1,000,000 tons each on Wednesday with a contribution of 4.37% each. V2015 and V2016 were not traded for the week. Delivery-wise, trading was concentrated on two months – Dec17 (51.75%) and Mar18 (32.95%) while a smaller portion traded on Dec18 (8.96%), Sep18 (4.37%) and Oct17(1.97%)

Open Interest had an overall net positive change of 4,798,000 contracts as we saw new contracts on the following deliveries: Mar18 (7,540,000 contracts added), Dec18 (1,880,000), Sep18 (1,000,000) and Oct17 (151,000). Conversely, the Dec17 delivery saw an overall dilution of 5,773,000 contracts. In terms of vintages the V2015, V2017, V2018, V2019 and V2020 saw 25,000, 3,498,000, 350,000, 100,000 and 825,000 new contracts, respectively.

The Ontario carbon market, continued to experience major gains in prices, despite a lull mid-week. 11 new deliveries were available in the secondary market from last Thursday. OCA front and benchmark prices now stand at CAD 19.06 and CAD 19.15. The current benchmark had a weekly gain of CAD 0.15. However, no trade or any change in open interest was observed for the week.

Ronjoy Bezbarua (ronjoy.bezbarua@californiacarbon.info)

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