CCA prices rebound as spread trades continue

December 18, 2017 by Abhilasha Fullonton

CaliforniaCarbon.info, December 11, 2017: California Carbon Allowances (CCA) had an active week overall with price rises and dips throughout the week as well as frequent inter-day prices ranges across deliveries. The week started off with a 4-cent increase since last Friday (12/8) followed by minor mid-week changes, topping off the week by 2-cent drop. As of Friday (12/15) the current front and benchmark (V17 Dec17) stands at USD 15.00 which indicates a 5-cent increase since last week. On Tuesday (12/12) inter-day prices ranged from 0 to 2-cents for deliveries. This trend continued on for two consecutive days.

 Volumes traded over the last week saw a 30% increase to 14,688,000 from 11,295,000 tons the week before. V2018 was the largest contributor with 8,430,000 tons exchanged which accounted for 57.39% of total traded volume. V2018 trading has overtaken V2017 which indicates a shifting interest in the market over to the next vintage as this vintage comes to a close. The second highest contributor this week is V2017 with 5,108,000 tons traded making up 34.78% of total weekly volume. Contributions from V2016 and V2020 made up 3.74%, 4.08% of total weekly volume respectively while no volumes were traded for V2015 and V2019.

Volumes were spread out between multiple deliveries adding Feb18 to the mix for the first time – Dec17 (7,562,000 tons), Mar18 (3,350,000 tons), Dec18 (2,951,000 tons), Dec19 (300,000 tons), Jan18 and Jun18 (200,000 tons), Jul18 (100,000 tons) and Feb18 (25,000 tons). These accounted for 51.48%, 22.81%, 20.09%, 2.04%, 1.36%, 0.68% and 0.17% respectively.

For V2018, entities are rolling over their combined spread trades from Dec17 over to Mar18 and Dec18. Around 3.8 million were traded as spreads between Mar18 and Dec18 at an implied funding rate of 2.05% (annualized).

 Open Interest changes

Around 543,000 open interest contracts were closed in the previous week. 3,350,000 closed under Mar18 while a high number of contracts opened up for Dec17 (967,000), Dec18 (1,055,000) and Dec19 (300,000).  Jan18 (200,000), Jun18 (160,000), Jul18 (100,000) also saw contracts opening up however Mar18’s closed contracts tilted the scale towards an overall drop in OI.

Following similar trend as volume and spreads, OI is gaining traction for V2018 which is evident from 134,000 increase in OI contracts while 1,002,000 contracts closed for V2017.

OCA reaction

Beginning of the week OCA saw a 2-cent gain followed by a 6-cent drop mid-week. Like CCA prices, OCA prices had a high inter-day price change on Friday (12/15) ranging from 7-cent gain for Dec17 to no price changes for Dec18. As of Friday (12/15) the OCA front and the benchmark prices now stand at CAD 19.31 while OI remained unchanged throughout the week with 780,000 Dec17 and 3,000,000 for Mar18.

Abhilasha Fullonton (abhilasha.fullonton@californiacarbon.info) 

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