The latest Commitment of Traders (CoT) report from ICE, released on Wednesday, shows that investment funds increased their net long positions—the difference between long and short positions—indicating that speculative traders have become more bullish on carbon prices.

According to market data available as of last Friday, net long positions increased by 2.3 million allowances from the previous week, a 9% rise that brought the overall net long position to around 36.7 million allowances, its highest level in six weeks.

The increase was driven by movements on both sides of the market. Speculative traders added 2.4 million allowances to their long positions, bringing the total to 64.5 million allowances, while reducing their short positions by 0.5 million allowances to 27.7 million allowances.

Despite the recent increase, the overall net long position remains well below the roughly 126 million allowances recorded in January, indicating that speculative bullish positioning is still considerably more subdued than at the start of the year.

Speculative fund holdings are widely watched as an indicator of market sentiment, as changes in long and short positions can provide insight into investors’ expectations for the direction of carbon prices. 

The latest increase points to improving bullish sentiment, but the large gap between current positioning and January levels suggests that funds still have limited conviction in a sustained rise in carbon prices.