Energy Spotlight: Oil tamed at $100/bbl range but gas keeps rising; IEA warns crisis continues

Once again, world energy markets were defined by a mixing of sentiment this week as gas goes up, oil stays down, and the IEA has come out early to remind traders a global energy crisis is still very much in play. 

The S&P/ASX 200 Energy Index is down -0.36% in mid afternoon trades on Friday but is up 1.71% over the week.

With that said, it’s lost -7.17% over the last month. 

Price headwinds

• US inflation over 9% and the incoming rate rises have got investors nervous with no real other catalysts competing

• Another week, another Chinese lockdown with more cities subjected to Xi’s Covid Zero strategies

• Recession fears have not gone anywhere with the IMF predicting a global 2023 recessionary environment 

Price drivers

• Markets largely priced in a high US inflation rate, and while investors wait for rate rises, Brent crude did recover some value in the hours following

• The IEA has predicted further energy volatility likely to occur through the Northern 2022 winter, likely providing upside potential for traders

• Continued concerns about a cut-off of Russian gas to Europe through Nord Stream 1 repairs continues to push up gas benchmarks 

US inflation, growing recession forecasts, and Chinese lockdowns have once again kept oil prices tame this week. 

Brent is currently trading at $100/bbl where WTI is trading in the high $90/bbl range.

Gas, meanwhile, has continued to act otherwise, with Dutch TTF Gas benchmark prices up 45.46% over the last month. 

UK gas benchmarks have seen some relief, down 20% over the last month, but still up 184% over the last year. It’s worth noting that Norwegian gas output has taken a hit in the North Sea this week, a major supplier to the UK. 

Weather is also heating up in the UK right now during the Northern Summer, boosting demand for house cooling.  

Perhaps winter will be the bigger issue. This week, the International Energy Agency (IEA) predicts another energy volatility crisis to hit in late 2022 as Russian product cuts coincide with the winter season. 

In short, it says the energy crisis is going nowhere. This is bad news for shivering lower-income households, but probably an interesting note for commodity traders. 

And a fun fact for the pro-ESG minded: unusually high rainfall in China is leading to improvements in hydropower generation in the region.

What to look out for next week 

Saturday 

• Baker Hughes US rig count data

Tuesday

• EU core inflation rate for June

• RBA meeting minutes 

Wednesday 

• American Petroleum Institute (API) crude oil stock data

• UK inflation rate for June 

• Canadian inflation rate for June

• US EIA crude oil import data 

Thursday 

• Bank of Japan quarterly outlook report 

• Indonesia interest rate decision 

• South Africa interest rate decision 

• US EIA natural gas stocks data 

Friday 

• Japanese inflation rate for June 

• Russian interest rate decision 

• Mexico’s mid-month inflation data for July 

Looking at Australian Majors: