Summary: 

1. CCA front on Friday closed at 26.97, gaining $1.07 over the week. 
2. ICE weekly volume was reported as 123.6 M tons (+223.6% WoW), 4-week moving avg. 56.02 M tons. 
3. Long positions by compliance entities decreased by 1.28 M tons and managed money decreased in short positions by 2.46 M tons.

The CCA market gained some ground after the front expiry, late last week, following a month-long decline in November. On Friday, allowances traded at $26.97, gaining 4.13%, over the week. 

US FED Chair Jerome Powell’s confirmed that smaller rate increases are likely ahead, as he sees inflation slowing down. The more dovish FED will incentivize investors to shift capital, from safer recession-stable assets to less conventional assets, including CCA’s.  

On Friday, the Payrolls and wages numbers for November came in way above expectations. Job growth was better than expected, nonfarm payroll increased, and average hourly earnings were double the expectations. The tight labor market makes the FED’s job more complicated, as it may have to reconsider its stance of lowering interest rate hikes. A net- negative for CCA’s, which has been heavily impacted by rising interest rates.

On the future market side, Open interest increased sharply by 18 M tons, nearly 8.3%, as investors begin rolling over their contracts, to future years. Most of the increased long positions came in from Other reported positions, with an increase of 10 M tons. The rest of the long positions came from managed money with 2 M tons and 6 M tons from swap positions. The new short positions were held by the other reported positions with 20 M tons of new short positions, and compliance entities by 4.18 M tons, while investors declined short positions by 2.46 M tons. Overall, investors were slightly bullish over the last week, driving prices upwards.

Technicals:  

Trading activity on the ICE exchange increased 223.6% WoW to 123.6 M tons. 

Trader Positions:  

CFTC V22: Positions across all traders (29^th November) 

In the CFTC data last reported on 29^th November 2022, total OI increased by 18 M tons. The compliance entities decreased long positions by 1.28 M tons and managed money decreased in short positions by 2.46 M tons. 

CFTC V22: Fund Manager change in positions (29^th November) 

Managed money increased long positions by 2.16 M tons, along with a decrease in short positions by 2.46 M tons. 

CFTC V22: Covered entity change in positions (29^th November) 

Compliance entities decreased long positions by 1.28 M tons and increased short positions by 4.18 M tons.  

Market Fundamentals: 

1. Read our latest Analyst Note and forecast on Emissions, Supply, Demand, and Price. 
2. In his speech on Wednesday, FED Chair Jerome Powell said that smaller interest rate increases are likely ahead and could start in December while raising cautioning that monetary policy is likely to stay restrictive for some time until real signs of progress emerge on inflation. 
3. U.S. natural gas futures fell 2% on Friday on predictions that the weather over the next two weeks won’t be as cold as originally expected. 
4. Oil prices rose on Monday following an agreement by the G7 group of nations and its allies to cap the price of Russian oil at $60 a barrel. 
5. Brent crude rose by about 0.6% to above $86 a barrel on Monday morning. 

Analyst:  

• Craig Rocha (cmrocha@ckinetics.com) 
• Megha Jha (mjha@ckinetics.com)