Summary:

1. Total Weekly Volume of 2.157M tons, -58% WoW change.
2. RGGI ICE weekly average settlement price was $14.25, -0.05% WoW.

RGGI futures have been consistently trading around the $14.25 price point. The high volatility in the US equity market has driven significant volatility into the RGGI market, with RGGI prices falling 1% on Friday.  RGGI prices are currently anchored by the Cost-Containment Reserve (CCR)  price at the auctions, and the futures market will continue to trade at a slight premium over the CCR price.

2.157 M tons of RGGI allowances were traded on the InterContinental Exchange (ICE), down 58% from the previous week. A split between Feb22 and Dec22 was traded on the exchange. Compliance Entities may prefer to buy at the upcoming auction at the CCR trigger price of $13.91 rather than the current $14.20+ trading price, the high future’s trading price is a reason for the suppressed volumes.

An analysis of traders’ positions from CFTC data presents that Managed Money has held their positions, and refrained from entering or exiting any position. Compliance entities have increased their net long positions by 0.46Mtons (+3.2%). Indicating C.E’s are bullish going into the next week.

Traders have increased their short position by 0.06M tons ( 2.5%) WoW, with compliance entities decreasing their short positions by 0.06M tons (3%) and managed money positions remaining constant.

An overall increase of 0.39M tons (1.2%) in long positions was observed over the week. Compliance entities increased their long positions by 0.4M tons (2%), and managed money decreased their long positions by 0.1M tons ( 0%).

The US equity markets had a rollercoaster week, the Nasdaq rose 2% in the early week and then fell 5%. The Russia-Ukraine conflict and the US inflation rising to 9.8% YoY, has resulted in a highly volatile market.  Managed money has retained their positions, and stayed away from opening new positions, while compliance entities have increased their net long positions by 0.46 M Tons. The ICE futures price is clearly well above the existing CCR which makes less sense to compliance entities, as even if the CCR is partly breached in the upcoming auction, the settlement price will still be the CCR itself at $13.91. We expect the prices to increase by between 0.5%-1%, as the Ukraine crisis subsides and investor confidence returns. 

Analyst: Craig Rocha (cmrocha@californiacarbon.info)