Market recovered after the auction results debacle

March 12, 2017 by chandan.kumar

Last week the market started up after the disastrous auction results announced in the previous week, where 88% of the current vintage remain unsold. The CCA front price opened at USD 13.55, USD 0.07 above the previous week’s close of USD 13.47. It crossed the current reserve price of USD 13.57, for the first time since the start of 2017, on Tuesday to reach USD 13.59, before closing for the week at USD 13.58.  The uneven recovery in price was however not accompanied by significant trading activities.

In terms of traded volume, with just 1,738,000 tons traded in total, the week remained the least liquid week since the start of 2017. This week’s traded volume was 36% below previous week and 41% below the 4-week moving average of 2,958,000. Trading remained concentrated solely around the current vintage-V2017. The upcoming front i.e. April 2017 registered some trading for the first time ever with 550,000 instruments traded this week. In terms of delivery, contracts were spread between current front, upcoming front and current benchmark-December 2017 delivery with 36%, 32% and 29% respectively of the total volume traded.  The week also witnessed a single transaction of 50,000 contracts further down the forward curve for December 2018 delivery.

The open interest creation slowed from the previous week, there was a net change of 425,000 contracts. However, 189,000 contracts were liquidated from the current benchmark i.e. V2017, December 2017 delivery and 550,000 new contacts were created for April 2017 delivery for the first time.

The current front closed at USD 13.58, USD 0.01 above the auction floor and USD 0.11 above the previous week’s close. The upcoming front-April 2017 delivery, witnessed some activity on Tuesday at USD 13.60. It reached its 2017 peak of USD 13.61 in the middle week before the weekly close at USD 13.60, USD0.12 above the previous week’s close. The December benchmark also registered a gain of USD 0.12, settling at USD 13.73. It touched a peak of $13.74 during this trading week. A rise of USD 0.12 or more was observed along the remainder of the forward curve.

The Ontario’s cap-and-trade market witnessed a single transaction during the last week with 15,000 in traded volume. The market closed at CAD18.41 on Friday, CAD0.11 above the previous week’s close of CAD18.30 However a minor change over the week in exchange rate from CAD 1.342 to 1.347 per USD makes OCA’s USD 0.03 costlier than the previous week’s closing.  OCAs price closed below the current vintage equivalent in California for the first time since the trading started for OCA’s.

Chandan Kumar (chandan@californiacarbon.info)


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