Summary:

1. CCA front on Friday closed at 28.5, gaining $0.65 over the week.
2. ICE weekly volume reported as 29.2 (-18.20% WoW), 4-week moving avg. 25.83 M tons.
3. CFTC: Total OI increased by 5.3 M tons (+2.44%). 

Last week, the Federal US reserve convened for a two-day meeting from Monday to Wednesday. Post this discussion, they enacted their second consecutive 0.75 percentage point interest rate increase to combat inflation. In his announcement on Wednesday, Chair Jerome Powell mentioned the Fed would start to slow hikes at a point eventually to assess their impact.

California CCA’s witnessed an upward trend, as Open interest across market participants increased along with a slight increase in price. The increase in Open interest was due to the entities rolling over to future deliveries. 

Technicals: 

Trading activity on the ICE exchange decreased 18.2% WoW to 29.2 M. Market indicators highlight a bullish market as a solid rollover to future deliveries was observed in the CFTC data, indicating strong market sentiments.

Trader Positions:

CFTC V22: Positions across all traders (26th July)

In the CFTC data last reported on 26th July, total OI increased by 5.3M tons. Spread positions increased by 27.39% to 26 M tons, as the rollover of Jul22 contracts to Aug22, and later delivery contracts gather steam.

CFTC V22: Fund Manager change in positions (26th July)

Managed money decreased long positions by 0.5M tons, along with an increase in short positions by 1.6 M tons. Managed money retreated from the market, as they expect a short-term decline in prices.

CFTC V22: Covered entity change in positions (26th July)

Compliance entities decreased long positions by 0.09 M tons and increased short positions by 2.7 M tons. Compliance entities remained bearish as short positions increased in the market while long positions witnessed a minor decline.

Market Fundamentals:

1. Read our latest Analyst Note and forecast on Emissions, Supply, Demand, and Price.

1. The United States became the world’s largest liquefied natural gas (LNG) exporter during the first half of 2022. Compared with the second half of 2021, U.S. LNG exports increased by 12% in the first half of 2022, averaging 11.2 billion cubic feet per day (Bcf/d).

1. The Federal Reserve on Wednesday enacted its second consecutive 0.75 percentage point interest rate increase as it seeks to tamp down runaway inflation without creating a recession. In taking the benchmark overnight borrowing rate up to a range of 2.25%-2.5%, the moves in June and July represent the most stringent consecutive action since the Fed began using the overnight funds rate as the principal tool of monetary policy in the early 1990s.

1. Early last week, Governor Newsom pushed California to move faster to achieve its climate goals and requested CARB to include new targets including at least 20GW of Offshore wind by 2045, and moving away from fossil fuels in the scoping plan updates.

1. Oil prices settled up more than $2 a barrel on Friday. Brent crude futures contract for September, which expired on Friday, jumped more than $3 a barrel during the session and then pared gains to settle at $110.01 a barrel, up $2.87, or 2.7%. 

Analyst: 

Craig Rocha (cmrocha@californiacarbon.info)

Megha Jha (mjha@californiacarbon.info)