Let us start with gas.
Because US futures didn’t move much since last week, I’m going to focus on the EU natgas futures market, where there’s quite a bit to talk about.
Russia, through its state-owned oil supermajor Gazprom, announced last week that the country will turn off its Nord Stream 1 pipeline for three days at the end of August and into early September.
Its excuse: maintenance. Usual fare from Gazprom.
If the Kremlin was seeking to entertain itself by watching panicked EU markets react, well, they got exactly what they wanted.
EU gas futures hit an all time high this week of EUR321/MWh—which reflects a one year return over 600%.
That all time high is huge in itself, given that the Dutch TTF benchmark has been hitting all time highs for the last two years straight. If Europeans thought their last electricity bill was bad, they aren’t going to like the next one.
That extends to the UK, too.
Worth noting: the upcoming Northern Winter isn’t too far away now, and forecasts on conditions for winter will start to influence trading behaviour. That is what Russia is exploiting to inspire market chaos.
While a heatwave slams Europe and rivers run dry (which is having its own effects on supply chains, pushing energy commodities up further,) the region also faces the Northern Winter, where the country will need even more energy supplies to fuel heaters during the frosty months.
Russia is exploiting the fear of a very real human cost by threatening to leave Europe without energy ahead of winter—unlike in Australia, the European winter can be deadly for those without warmth.
Germany’s government has already agreed to turn down the heating in public buildings across winter this year.
Now let’s turn to oil.
For another week, Brent crude stayed closer to $100 than it did to $90/bbl, where it looked like it wanted to stay two weeks ago. Global road data provider TomTom this week revealed traffic levels across the Asia Pacific, US, Canada, and Europe, are on the way back up.
While this obviously means more fuel into more vehicles, busy roads are also an indicator of increased economic activity, with people hitting the highways and leaving the house to work, seek entertainment and recreation, or transmit family members from point A to point B.
That in itself is often interpreted as a positive signal for bullish trading behaviour across the board.
Also driving the price of oil back up is perceptions OPEC+ may cut global production, but, OPEC+ spends a good deal of time saying that.
There is a good chance the shutdown of a BP refinery able to pump out 435,000 barrels of oil per day is factoring into traders' predictions of high demand and small supply.
A fire broke out at the Whiting refinery in Indiana earlier this week and so far, there is no word from the supermajor on when operations will resume.
While one 435Kbpd facility may not be much in the grand scheme of things, plant shutdowns are closely watched by oil traders, and what oil traders watch is often more important than what’s actually happening.
Worth noting: prices also faltered ahead of the Jackson Hole speech in the US, but Bloomberg also noted the Jackson Hole yearly event doesn’t actually impact markets as much as event organisers like to say it does.
Ongoing lockdowns in China, refreshed since another outbreak last week, will likely limit perceptions of oil demand
The US has technically entered a recession with two quarters of contracted growth
Consumers in the UK and EU are also expecting recessions
Global traffic densities increased this week, a positive signal for bullish sentiment on economic activity (and thus crude oil)
Geopolitical hostility continues to push up the price of European gas, with knock on effects for international benchmarks as half the planet begins seeking to secure supply for winter
Baker Hughes US rig count data
EU economic sentiment data for August
EU industry sentiment data for August
EU consumer confidence for August
German inflation rate
Japanese consumer confidence data for August
EU inflation data for August
Indian GDP growth rate data for Q2
Weekly US crude oil stock change data
Energy Information Agency (US) weekly data drop
Chinese manufacturing data for August
Australian commodity prices data for August
The S&P/ASX 200 Energy Index (aka XEJ) closes the week up 1.50%.
Woodside Energy (ASX:WDS) closes the trading day up 1.41% at $36.01.
One week returns for Woodside investors are up 11.9%.
Santos Limited (ASX:STO) closes the trading day up 1.54% at $7.94.
One week returns for Santos investors are up 12.3%
Beach Energy (ASX:BPT) closes the trading day up 0.57% at $1.76.
One week returns for Beach investors are up 7.62%
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