Traded volume subsides ahead of auction results

August 21, 2017 by Ronjoy Bezbarua

The WCI’s 12th Joint Auction took place last Tuesday offering 63.8 million CCAs in the Current Auction and 9.7 million in the Advance Auction. Given recent policy news and market confidence, a fully subscribed auction is widely anticipated. A surge in interest and trade of future vintages also points towards a well subscribed Advance Auction.

Following a busy week of pre-auction trade the previous week, last week saw a slender 2.6 million tons clear the exchange. With participants awaiting this Tuesday’s auction results, prices remained stagnant across the week closing on Friday at USD 14.70 for the current front contract (Aug 17) after a slight dip on Thursday.

A modest 820,000 tons were traded on the current V2017, a sizeable decline to the previous week which saw 7.9 million tons of trade on the same vintage. The forward V2018 futures were the most popular, totalling 1.2 million tons of weekly trade and accounting for 47% of total volume, a sign that traders are looking ahead to future compliance periods. The future vintages V2019 and V2020 saw trade of 370,000 tons and 200,000 tons respectively.

In terms of deliveries, the Dec 18 contract witnessed the highest trade, with over 1.5 million contracts exchanging hands. 570,000 tons were traded on the Dec 17 benchmark whilst the current front (Aug 17) and next month’s front (Sep 17) saw a respective 50,000 tons and 450,000 tons of trade.

Open interest on the CCA contracts saw a positive net change reflecting the increased interest in advance vintages. Most notably, the V2018 saw nearly 3.3 million contracts created while the V2017 saw a positive change of over 2.1 million contracts. Delivery-wise, the Sep 18 and the Dec 18 fronts gained over 3.4 million contracts combined which is close to 60% of the total overall net change. This is likely due to traders planning to roll auction-bought allowances to the end of the year.

The Ontario carbon market saw yet another week without activity with no changes in price, trade or open interest. The OCA Dec 17 benchmark closed the week at CAD 18.80 (USD 14.94 as per Friday’s daily exchange rate). Ontario will hold their third auction

Billy Hamshaw (billy@californiacarbon.info)

Ronjoy Bezbarua (ronjoy.bezbarua@californiacarbon.info)

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