Q1 2022 Energy News and Market Insights

  • 27 Jan 2022
  • By CME Group
  • Topics: Energy

Voluntary emissions offset product suite takes off in 2021

In 2021, over 47M carbon offsets were cleared through first-of-their-kind voluntary emissions offset contracts by CME Group – Global Emissions Offset (GEO) and Nature-Based Global Emissions Offset (NGO) futures.

After launching in March and August 2021 respectively, GEO and NGO futures have quickly established themselves as the pricing benchmarks for the international Voluntary Carbon Market (VCM). Open interest across both contracts reached over 15M offsets outstanding on December 29 ahead of the seventh successful delivery cycle in 2021. Over 6.5M offsets were delivered in 2021, with 5.9M going to delivery in the popular December contract.

Ecosystem Marketplace reported the global Voluntary Carbon Market exceeded $1B in 2021, up from $300M in 2020. With the global VCM expected to grow significantly this year, and more counterparties entering the space each day from a diverse set of backgrounds, 2022 is poised to be an exciting year in the VCM on CME Group.

Source: CME Group

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Volatility follows shifting crude flows to Asian refiners

China’s oil refineries have forged ahead with capacity expansions, leading to a greater demand for imported volumes from the Middle East and the Atlantic basin. Price risk management plays an important role in dealing with the price-spread relationships between crudes priced against Dubai and Oman and those that are priced on a WTI- or Brent-related basis.­ ­

Up to 20% of total daily WTI futures volume was traded during Asian hours over a 12-month period to December 2021. With U.S. crude exports to Asia on the rise, the role of WTI linked pricing is expected to gain further traction in the region to reflect the growing quantities of U.S. crude being refined.

Asian trading liquidity sees 20% of WTI traded outside U.S. hours.


Biofuels thrive on net zero carbon ambitions

The U.S. and Europe are leading the charge in the production of biofuels and lower carbon emission feedstocks, such as renewable diesel in the U.S. and hydrotreated vegetable oils (HVO) in Europe.

Vegetable oils are playing a key role in the development of the biofuels markets and are expected to remain pivotal in the run-up to 2030 ‒ and beyond to the key net zero targets in many countries by 2050. This presents a sourcing challenge for both producers and blenders, possibly resulting in volatility in feedstock prices.

Price volatility across the vegetable oils sector is expected to draw in new market participants looking to hedge growing renewable energy production volumes.

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Container Freight Rate futures launching February 28, 2022*

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*Pending regulatory review


Record volume for Crude Oil Weekly options in 2021

Crude Oil Weekly options traded over 4K lots per day, with an average of 5.5K lots traded daily in Q4 and a single-day volume record of 19,865 contracts on November 26, 2021.

Average daily open interest reached new heights at 9,176 contracts – the highest since Q1 2020. Since introducing 0.25 increment strike prices on June 28, over 100K lots traded in 0.25 or 0.75 increments.

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All data is at January 6, 2022 unless stated otherwise


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