According to the latest available Commitment of Traders (CoT) data, published by the ICE platform for the week ending on 10 November, speculative investors have continued to increase their net short positions (short term positions – long term positions), an upward trend that began in early August.

The CoT report has been published each Wednesday by the ICE since 2018,  reflecting the positions held on the previous Friday by financial institutions and operators with Obligations Under Directive 2003/87/EC. The document is seen as an analytical tool for traders providing valuable information on the market sentiment: net long positions are associated with bullish bets and vice versa.

Source: ICE, graphic by EMBA Power 

Figures show that investment funds have increased their short positions by 6,4 million allowances to a record of 58,2 million allowances. The funds have also increased their long positions by 2,8 million allowances to a total of 24,7 million allowances.

 

Consequently, speculators are now net short by 33,5 million allowances, setting a new high and indicating a very negative view of the market. However, “the market may be approaching a turning point,” warned Carbon Pulse.

 

There is a broad consensus among traders that such huge concentration could send the carbon prices in the opposite direction due to short squeeze. This is a phenomenon that appears when huge net short positions are built, creating additional demand, and pushing carbon prices up.