CaliforniaCarbon.info, June 6, 2016: This week’s aggregate traded volume of 6,676,000 demonstrates the busiest market we have seen for a month.  The figure was significantly swollen by two 2,000,000 plus trades transacted in Friday’s falling market, unfortunately the open interest data for the end of the week has not been published, and thus it is difficult to decipher the full nature of this pair of trades. When looking at the week’s data as a whole, trading was split very evenly, 47:53 between the June front and the current year-end. Whilst regarding vintages, V16 took the predictable lion’s share with 65%; V17 then claimed the next 30%, leaving the remaining 5% to fall on V15 and V18.

A novel situation panned out on the market’s book of open interest this week. The OI total across vintage and date fell by 684,000, the last time the book shrunk by this much or more in a single week was early December 2015. The previous few weeks’ trend of loss at the year-end was matched by deletion on the front as well, a net 525,000 contracts fell off the book’s front. The possibility of this occurrence is perhaps limited only to the months of June and December; as the half and year calendar waypoints, these are the only two months that see significant contract build-up. Thus we can predict this net deletion stemmed from futures struck several months or more ago, it is not the product of ‘indecisive trading’ on the front.

The front ended up $0.05 for the week, closing at $12.46 on Friday; the annual benchmark closed just above this at $12.56. However, front prices actually reached a week high on Thursday at $12.50 before dropping to the above level. A very slight spread between vintages has now emerged on the exchange, V2015 consistently trades at a $0.02 premium to the advanced V2019. The last time this was the case was approximately 9 months ago, whether its emergence is material is to be decided. It may reflect the upcoming compliance requirement for 30% of 2015 emissions, possibly the risk associated with the WCI program in the longer-run, and certainly a straight forward future discount.

Harry Horner – (harry@californiacarbon.info)