Speculators increased their net long positions in EUAs yet again, according to the latest  Commitment of Traders (COT) data released on Wednesday morning by ICE. The future contracts traded by investment funds totalled a net position of 55,5 million allowances as of 31 January, gaining 2,5 million allowances from the previous week. This is the biggest bullish bet on carbon prices in three years.

At the end of last week, long positions reached an impressive 99,1 million allowances, rising 5,1 million allowances compared to the previous week, while short positions increased at a slower pace by 2,5 million allowances to a total of 43 million allowances. 

These holdings suggest that investors strongly believe that carbon prices will increase, a bullish signal for the EUA price.The sentiment reflected in the most recent reports by ICE is confirmed by trading data. In January, carbon prices recorded a 15% monthly increase while investment funds have more than doubled their net long holdings over the same period.

However, net-long speculative positions excessively high could lead to long unwinding, a market phenomenon where investors sell stocks they previously bought putting a downward pressure on prices. 

The last couple of days have seen growing speculation over whether funds have been discreetly closing their long holdings with EUAs now trading around €4,5 below Friday’s high despite higher gas and calmer equities compared to Monday’s turmoil.