Summary:

1. Total Weekly Volume of 5.242M tons, +318% WoW change.
2. RGGI ICE weekly average settlement price was $14.33, +0.05% WoW.

RGGI futures have traded between $14.30 to $14.40 for the last two months. The low volatility in the RGGI market is due to market confidence that the upcoming auction will close at $13.91, which is the Cost-Containment trigger price for 2022. The CCR reserve of 11 million allowances is the core reason for the price stability, in a period when California CCA, EU ETS, and US Indices have seen significant volatility. The Russia-Ukraine crisis and fiscal tightening had an insignificant impact on the RGGI prices. Futures prices will continue to trade slightly over the CCR price of $13.91 for the foreseeable future.

Volumes

5.242 M tons of RGGI allowances were traded on the InterContinental Exchange (ICE), up 318% from the previous week. The rise in the number of contracts traded was driven by the interim compliance surrender period, which required compliance entities to surrender 50% of 2021’s emissions by the end of last week. Feb22, Mar22 and Dec22 futures contracts were traded with 0.85 M tons, 0.977 M tons and 3.39 M tons, respectively.

CFTC Data

An analysis of traders positions from CFTC data presents that Compliance entities  have aggressively increased their short positions by 12% WoW. Compliance entities’ long positions increased 1.4% WoW, while Managed Money decreased their positions by 0.9%. Compliance entities increased positions as a rise beyond current RGGI remain improbable, and the futures market will lower to $13.91 by the upcoming auction on March 9th.

The RGGI market price has remained stable through a very volatile financial period, and will remain for the foreseeable future. The only possible risk to the RGGI currently is a possible  failure of Pennsylvania’s addition which would massively impact investor confidence in the RGGI market.

Analyst: Craig Rocha (cmrocha@californiacarbon.info)