Investment funds ditch carbon after failure to decisively breach €100

After first pushing through €100 per tonne on 21st February, the EU carbon market then twice attempted to push decisively through the €100 per tonne level, failing on both occasions.

That was enough of a signal for investment funds to dial back their exposure.

The latest Commitment of Traders (COT) report (w/e Friday 21st April) shows that as carbon failed to even breach the €98 per tonne level in the second week of April, investment funds cut their exposure even more, culling their net long position by 4.7 million EUAs to 7.4 million EUAs. By the end of last week, EUAs had declined to the €90 level (see EUA Commitment Of Traders (COT) data 101 at the end of this article if you are new to the data).

Analysing the COT report can give investors an insight into how market participants react at different price levels and to certain fundamental factors. Investment funds are especially important to watch. This article delves into the COT report into even more detail to understand what clues we can glean from their past behaviour, what it might mean for EU carbon prices in the short term, and the fundamental factors we need to watch out for during the rest of 2023 and beyond.