Summary:
1. ICE CCA front stable at $27; (-$0.13 WoW)

2. Large increase in OI of 7.6M tons WoW*

3. Market await further signaling from Fed Chair Powell, today at 9 am PT

Last week at the InterContinental Exchange (ICE), a total of 26.3M tons of California Carbon Allowances were traded on the secondary market. The four-week trading volume was at 35.8M tons. A substantial 7.6M tons of fresh Open Interest positions were created WoW*. The Mar22 and Mar23 contract received over 2.5M tons of OI. The CCA front was stable above $27.

CFTC: V22 Fund Manager positions (15th March)

Since 10th March, the CCA front price has remained above $27. In this period, fund managers have released 1.9M tons of long positions, some of which were created in the report week of 8th March when prices bottomed out near $24. This move is more of a short-term win rather than a change in sentiment.

CFTC: V22 Compliance positions (15th March)

Covered entities have been reading this market well. They increased net long positions by 1.3M tons as reported on 22nd Feb, before the auction result was announced. After the expiry of the Feb22 contract visible on the 1st March data point, they increased short positions by 2.9M tons. Arguably, their change in sentiment around the Ukraine crisis dropped CCA prices to $24. In the data reported on 15th March, they increased net long positions by 1.1M tons.

CCA prices are steady near $27, but there could be heightened volatility created from traders seeking short-term wins. Fresh OI positions have been created on Mar22 (2.9M tons) and Mar23 (2.9M tons) contracts. With the war in Ukraine still underway, compliance sentiment may not have improved. Financial positions are also expected to reduce considering that the Feds announced a 25 basis point increase in interest rate. Mar22 position. Market participants could react to external market jitters. The market awaits Powell’s speech today at 9 am PT on the US Economic outlook. From sources, the Feds may now increase the interest rate 7 times this year to between 1.75 and 2 percent by the end of 2022. The underlying CCA fundamentals hold and participants could use the lower price points to buy long. We expect higher price volatility in this week’s trading sessions.

*WoW OI Change reported between 17th Mar and 10th Mar. 

*CFTC Data last updated 15th March

Analyst Contact:

Anant Jain (anant.jain@californiacarbon.info)