1 min read

Investors rebuild massive carbon short bets

(Montel) Speculative investors grew their bets on falling carbon prices last week to just shy of a record high net short position reached earlier this month, Ice exchange data showed on Wednesday.

Investment funds were net short by 33.4m tonnes last Friday, compared with a net short position of 30.8m tonnes the prior week, according to the exchange’s latest report on the commitment of traders.

Specifically, the funds added 4.3m tonnes of short positions to a total of 60.4m tonnes and increased long positions by 1.8m tonnes to 27m tonnes. This left net short positions marginally below a record 33.5m tonnes reached on 10 November.

The benchmark Dec 23 EUA contract for carbon allowances has collapsed to one-year lows since breaking the threshold in intraday trading last week. The market was last seen at EUR 72.30/t, down EUR 0.58 on the day.  It extended Tuesday’s low to hit a fresh one-year low of EUR 71.50/t earlier today.

Technical support for the contract at present lay at the price points of EUR 72.01/t , EUR 71.28/t and EUR 70/t, said Redshaw Advisors in a note late on Tuesday.  

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.