The California carbon allowance  (CCA) market picked up significantly as news of a fully subscribed auction was announced last week. The auction clearing only added to the bullishness to the CCA market as it cleared USD 1.18 above the floor price.

Prices across all contracts continued to rise throughout the week, finally coming close to the historically high levels last seen on July which was largely on the back of the positive sentiments from the cap-and-trade extension vote for AB 398. The current front changed to V17 Sep17 on Tuesday, and rose to USD 15.32 on Friday, a clear USD 0.14 over the previous closing price. The current benchmark (V17 Dec17) stood at USD 15.42 on Friday.

Traded volumes rose up by over three times as compared to the week before with an overall trade of over 7.4 million tons reflecting the post-auction increase in spot volume. Trading activity was restricted to the current vintage V2017 and V2018. V2017 was traded over 5.9 million tons and contributed to 79.57% of the overall volumes. V2018, on the other hand, was traded over 1.5 million tons and contributed to 20.43%. In terms of deliveries, the contribution was more evenly spread out. The current front and benchmark traded over 2.4 million tons each while the upcoming benchmark Dec18 was traded 1.55 million tons. Aug17 traded over 1 million tons of trade before the front switched on Monday.

Open interest creation saw a far better show as compared to the week before, with a net positive change of 2,656,000 contracts. The current front and benchmark both were both major contributors, with net positive changes of 1,586,000 and 1,145,000 contracts respectively. The Mar18 delivery saw a minor net positive change of 50,000 contracts. The Dec18 delivery, conversely,  saw a dilution of 125,000 contracts.

The Ontario carbon market picked up during the week with the front (V17 Sep17) price now at CAD 19.12 (USD 15.43) and the benchmark (V17 Dec17) prices at CAD 19.25 (USD 15.54). However, no trade or any change in open interest was observed for the week. The third auction for the Ontario market will be held tomorrow.

Rahul Rana (rahul@californiacarbon.info)

Ronjoy Bezbarua (ronjoy.bezbarua@californiacarbon.info)