California carbon prices inched up last week in light activity as weak fundamentals continue to weigh on a market that traders say is well-supplied – even oversupplied – by the state’s quarterly auctions.

The Dec-15 contract settled at $12.74 Friday on ICE, up one cent for the week on thin daily volumes.

Front-month July-15 saw an uptick in trading with about a million tons changing hands at mid-week. It gained 2 cents week-on-week and is up 4 cents since the start of the month.

Brokers played down the possibility that the volume increase in the July contract was due to the prospect of an increase in power emissions as the deepening California drought restricts access to hydro generation.

“[The market is] so oversupplied that it’s never going to be a price driver,” one said.

Traders say bearish long-term fundamentals outweigh any short-term developments that could spark volatility in spot contracts.

“I think the big compliance guys – the utilities, the refineries – go out and do a lot of their business around the auction,” said Anthony D’Agostino, director of emissions markets for RBC.

“The biggest thing that moves the front-month market is the auction,” he said. “This market is not very spot or short-term active. There would have to be a major event – like a nuke shutting down.”

OFFSET BACKLOG

The California Air Resources Board last week certified 75,404 new carbon offsets, bringing the total number issued to 21.3 million, of which 17.4 million are eligible for transfer.

No additional early-action credits were approved despite the agency recently adding two new staff members to help clear an administrative backlog.

Some market participants are skeptical the hires will empty the pipeline in time to meet a 2016 deadline for all such units to be eligible for compliance.

By Robert Mullin – news@carbon-pulse.com

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