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Post-auction week remains quiet due to holidays

November 30, 2015 by Harry Horner

CaliforniaCarbon.info, November 30, 2015: Only 2,137,000 California carbon allowances (CCAs) were traded last week, under a tenth of the volume witnessed in the busy week before. The week ranks in the bottom five weeks for weekly traded volumes in the entire year. Trading last week was cut short due to the holidays with no activity occurring on Thursday’s Thanksgiving and the following Friday.

Of the trading that did occur, 71.7% of volume traded occurred at the front of the forward curve, whilst 91.7% of volume traded fell on V2015 and V2016, and remainder on V2018. Some spread trading continued with 900,000 V2016s split equally for deliveries in Dec15 and Dec16. The market inactivity was also reflected in the open interest as the week saw the smallest aggregate week-to-week change in the last 3 months, increasing by only 798,000.

Deliveries in the third compliance period (2018-2020) lost some of the gains made in the previous week; December 2018, 2019, and 2020 deliveries fell by $0.13, $0.28, and $0.25 respectively. Without any volume traded on these deliveries, these drops in prices seem to represent a readjustment to aforementioned rise which coincided with heavy trading towards the end of the previous week.

As expected, the market impact of Tuesday’s auction results was neutral. The 5th joint auction with Quebec saw the current offering of 2015 vintage allowances clear at $12.73, whilst the advance 2018 vintage cleared at $12.65. With the 4-week moving average rising to its highest in nine weeks, increased activity before the release of the auction results suggest that many entities had already adjusted positions in anticipation of the incoming spot volume.

Harry Horner – (harry@californiacarbon.info)

Rahul Rana – (rahul@californiacarbon.info)

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