Summary:

1. CCA front on Friday closed at $29.93, losing $0.65 over the week.
2. ICE weekly volume reported as 8.79M tons (-58% WoW), 4-week moving avg. 23.50 M tons.
3. CFTC: Total OI decreased by 2.76M tons (-1.27%). 

CCA front prices declined by $0.65 over the week, ending the week at $29.93 below the $30 mark. The CCAs have been in decline over the week, while the Nasdaq increased 5% WoW. 

While the market didn’t react sharply to the SC ruling on 30th June against the EPA, a steady decline in prices is visible throughout the week. 

The Supreme Court has limited the EPA’s authority to limit Greenhouse gas emissions from the power sector. Additionally, the Commonwealth Court of Pennsylvania put an injunction on Pennsylvania from joining the RGGI, and the Department of Environmental Protection will now take the matter to the state’s supreme court. The state was scheduled to join the RGGI from the 1st of July. 

These recent policy upheavals have weakened participant motivation. The apex court holds historical precedents hostage, while politics will seemingly turn away from the climate-friendly policy in the interest of energy security.

Technicals: 

Trading activity declined 58% WoW on the ICE exchange. The vulnerability of the market to judicial interventions has had a negative impact on volumes traded.

Trader Positions:

CFTC V22: Positions across all traders (5th July)

Total OI decreased by 2.76M tons. No new positions were created, as long positions shifted from compliance entities to managed money.  took up more long positions as CCA prices declined. Their hope for a price recovery remains ,as market fundamentals hold..

CFTC V22: Fund Manager change in positions (5th July)

Managed money increased long positions by 1.25M tons.

CFTC V22: Covered entity change in positions (5th July)

Compliance entities decreased long positions by 1.01M tons and declined short positions by 0.755 M tons. Compliance entities have reduced more long positions than short.

Market Fundamentals:

1. Read our latest Analyst Note and forecast on Emissions, Supply, Demand, and Price.
2. Natural gas futures increase 5% WoW to $6 but have declined 30% since the start of 2022. Growing recession fears have led to lower than expected demand, also the Texas Free point LNG exporting facility closure has resulted in additional supply in the US.
3. Russian gas supplies to Germany via the Baltic Sea pipeline have been halted for 10 days, with Germany fearing that the temporary shutdown may turn permanent.
4. CPI for all items rises 1.0% in May; shelter, gasoline, and food indexes rise. Increased interest rates have dulled demand slightly, lowering inflation,

Analyst:

Anant Jain (ajain@californiacarbon.info)

Craig Rocha (cmrocha@californiacarbon.info)

Megha Jha (mjha@californiacarbon.info)