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Investors resume building short bets on carbon

(Montel) Speculative investors resumed building their bets on falling carbon prices last week to snap a month-long trend of declining net short positions, Ice exchange data showed on Wednesday.

Investment funds were net short by 28.8m tonnes by last Friday, compared with a net short position of 20m tonnes the prior week, according to the exchange’s latest report on the commitment of traders.

The funds specifically added 10.2m tonnes of short positions to a total of 53.7m tonnes. They also added 1.4m tonnes of long positions for a total of 24.9m tonnes.

The benchmark Dec 24 EUA contract tumbled 14% last week. It was last seen trading marginally lower on the day at EUR 65.30/MWh, though earlier it touched a 15-month low of EUR 64.53/t.

Auctions resume
The carbon market’s auction supply resumed this week following a hiatus over the Christmas and New Year holiday period.

“The auctions have not led to further significant price declines but signs of a recovery continue to find selling interest,” said Redshaw Advisors in a note.

“On the downside, support has emerged below EUR 65/t the last three trading days.”

Carbon market participants view the balance of investment funds’ positions as an indicator of market sentiment.

The emergence of large concentrations of long or short positions can amplify moves in the opposite direction when traders need to stop further losses on poor bets.