natural gas prices

Energy prices continue to fly into the stratosphere, adding 30% since the start of April, strengthening at twice the rate of March. The last time US gas was this expensive was in October 2008. Energy, oil, and gas have a very high price elasticity Demand for American gas has surged as Europe tries to cut back on purchases from Russia as much as possible. But this also puts the current commodity sharply in short supply. Energy, oil, and gas have a very high price elasticity, meaning that a supply or demand shift of just a couple of per cent leads to a much higher price change. Thus, the US provokes soaring prices on domestic markets by providing Europe with gas. Oil also receives a strong upward marches, not only as of the closest substitute but also as another Russian export that the world is in a hurry to abandon. Oil prices managed to stay in an uptrend WTI was back above $105, and Brent closed Thursday above $110, returning to levels of two weeks ago. Oil prices managed to stay in an uptrend, albeit this time as a slider amid accelerating gas prices. The performance of oil and gas prices is supported by US export figures, which is favourable for the Dollar. Notably, in contrast to the historical correlation, energy is rising with the Dollar, although more often than not, a rising dollar pressures energy. As one of the leading energy exporters, having strengthened its position, the states will economically have the most negligible impact on the economy compared with most developed countries that are net importers of oil and gas. Fed can raise interest rates more quickly Higher energy costs may not prevent the Dollar from moving somewhat up further but may strengthen it by giving the Fed carte blanche to tighten policy more forcefully. The Fed can raise interest rates more quickly, but it can also push them to higher levels without the risk of seriously hurting the economy.

Gas prices on the NYMEX are adding for the 11th trading session of the last 12, renewing their highs since October 2008. US gas exchange prices have risen by a third since the beginning of the month and more than doubled since the beginning of the year in response to a surge in demand in Europe and rising oil prices. Companies in Europe and Asia are set to cut their purchases of Russian energy as fast as possible, pushing prices up. While the fundamentals are tilting toward later growth, technical analysis increasingly points to overbought conditions, so the likelihood of an imminent correction. In the monthly candlestick chart, the RSI is entering overbought territory (>70), which it has done only six times in the past 20 years. In all cases, prices declined sharply in the following month, or we even saw a fundamental long-term reversal. Thus, it is likely that we could see a bear attack by the end of this month. On the daily charts, the RSI has risen to 88. The last time it was higher was in 2018 briefly, which was also near price peaks. The price frenzy was also fuelled by news of falling oil and gas stocks. However, seasonality is strong in gas, and inventories reach their lowest just in the first days of April. We saw a rise last week, marking the first signs of a trend reversal. However, in the longer term, the current gas price situation lays the foundations for a new gas renaissance in the USA, and it should lead to a recovery in production rather than a price hike.

Summary: Brent Crude Oil prices are on the rise again hitting their highest prices since late March. Natural Gas Prices hitting almost 14 year high. Cotton prices increasing with crop planting is ahead of schedule. Brent Crude Oil spikes as Libya shuts its biggest oil field The market sentiment for Brent Crude Oil is bullish, reflecting the tight market supply. In an already under-supplied market, the price of Brent Crude Oil rose in reaction to Libya shutting their biggest oil field. The shutdown came in response to protests against the country's prime minister. In addition, increased tensions between Russia and The Ukraine raised concerns of the EU tightening sanctions. The price of Brent Crude Oil is expected to keep rising amidst the concerns of supply shortages world wide.   Read next: (UKOIL) Brent Crude Oil Spikes to Highest Price For April, (NGAS) Natural Gas Hitting Pre-2008 Prices, Cotton Planting Has Begun   Brent Crude Oil Price Chart Natural Gas Hits Highest Price since 2008 The NGAS commodity price reached its highest since late 2008, the high prices come in reaction to abnormal weather temperatures along with the supply shortages. In addition, the NGAS inventory is currently sitting at almost 24% lower than this time last year. The mix between increasing demand and tight supply, is contributing to the rising price of the commodity. The Russia-Ukraine conflict still remains one of the main drivers for the increase in NGAS prices.   For you: Forex Rates: British Pound (GBP) Strengthening? Weak (EUR) Euro? GBP, NZD And AUD Supported By Monetary Policy?   Chart Showing the Price of NGAS Cotton July ‘22 Futures Rise as Crop is Planted The price of cotton futures bounced back in yesterday's trading market and in the past week as a result of the cotton crop being planted, the pace of planting is ahead of last year's pace and seems to be sparking investor confidence. The price of cotton is still dependent on some macroeconomic issues such as; post the COVID-19 world, whether the Russia-Ukraine war will be contained and the U.S.-China trade relations. In addition, factors such as weather will also play a part in the futures price of cotton. Cotton Futures Price Chart Sources: Finance.yahoo.com, Marketwatch.com, Tradingeconomics.com, investingnews.com Charts: Finance.yahoo.com

Summary: Natural Gas and RBOB gasoline prices are expected to increase even more throughout 2022. Increasing energy prices raise concerns around the future of clean-energy. Increasing costs of metals are driving the price of renewable energy up. Natural Gas Futures prices are expected to increase further this year. Over the past week the price of Natural Gas has dipped and then recovered. Since the market opened this morning the price of this commodity has fallen by almost 2.6%. On Wednesday the World Bank released a statement indicating that they expected energy prices to increase by a further 50% throughout 2022 before easing in 2023 and 2024. The prices of most commodities are dependent on what happens with the Russia-Ukraine conflict, which has already shocked the commodity market by altering trading patterns, production and consumption. NGAS Futures Price Chart RBOB Gasoline prices are expected to increase in 2022. Since the market opened this morning, the price of RBOB Gasoline has fallen by almost 0.7% and has seen varied prices over the past week. Since RBOB Gasoline forms part of energy commodities, the price is expected to increase according to the World Bank's forecast above. The increase in energy prices has raised concerns that the transition to clean-energy will be delayed, as many countries have announced plans to increase their production of fossil fuels. RBOB Gasoline Futures Price Chart Copper Futures prices are expected to increase in 2022. According to the article of commodity markets outlook released by the World Bank, the price of metals are expected to increase almost 20% in 2022. Should the war between Russia and the Ukraine persist, price forecasts could change even more. The price of Copper will also be affected by the changing trade patterns being more expensive, in addition the higher metal prices are pushing up the cost of renewable energy in general. However, since the market opened this morning the price of copper has fallen by 0.83%, this has been the general price trend of the commodity over the past week, perhaps a result of investor sentiment and uncertainties around China's lockdowns. Copper Futures Price Chart Sources: worldbank.org, finance.yahoo.com

Your daily roundup of commodities news and ING views Gas storage tank Energy Oil sold off with risk assets on Monday, but it failed to follow equities higher yesterday. Instead, downward pressure on the market continued, which saw NYMEX WTI settle below US$100/bbl. Growth concerns continue to weigh on commodities, and a stronger USD only adds further downward pressure to the complex. This weakness has continued in early trading this morning after the API reported that US crude oil inventories increased by 1.62MMbbls - the market was expecting a small draw. In addition, API numbers also showed an increase in refined product inventories. Gasoline and distillate fuel oil inventories increased by 823Mbbls and 662Mbbls respectively. If today’s EIA report shows similar numbers, it would be the first weekly increase for US gasoline inventories since late March and the first for distillates since early April. However, the middle distillate market is still very tight and so we would expect US heating oil cracks to remain well supported. In fact, middle distillate cracks around the world should remain well supported, given the tightness in the market and concerns over Russian gasoil exports. The EIA released its latest Short Term Energy Outlook yesterday. The report cut expectations for US oil production growth for 2022 from around 833Mbbls/d to 731Mbbls/d, which implies US oil output averaging 11.91MMbbls/d this year. However, for 2023, supply is expected to grow by 940Mbbls/d (largely unchanged from last month), which would see US output hitting a record 12.85MMbbls/d. Obviously, the biggest concern for the global oil market is around supply in the short to medium term, given the uncertainty over Russian supply. And the downward revisions to 2022 output estimates will do little to ease these concerns. European natural gas prices showed some strength yesterday. TTF rallied by more than 5%, settling close to EUR99/MWh. This strength came after Ukraine’s gas grid operator (GTSOU) declared force majeure on the transit of Russian gas through Sokhranivka, which accounts for about a third of Russian gas transited via Ukraine. GTSOU has said that it is not possible to continue operations through Sokhranivka due to Russia's military aggression in the region. GTSOU said that gas can be rerouted through Sudzha (another entry point), Gazprom has reportedly said that this is not technically possible. Dutch gas network operator, Gasunie has said that it has contracted a second FSRU (floating storage and regasification unit) for the next 5 years, which would allow it to regas LNG imports at Eemshaven in the north of Groningen. The FSRU is expected to arrive in the third quarter of this year, and along with another FSRU already contracted, would provide a total of 8bcm of regasification capacity at Eemshaven. This regasification capacity would exceed the roughly 6bcm of natural gas that the Netherlands imports from Russia every year. The big question though is if there is enough LNG supply to fully use this capacity, particularly with Germany also securing 4 FSRUs, with an annual capacity of as much as 29bcm. Some of this capacity in Germany is also expected to come into operation ahead of the next winter.   Metals Base metals continued to decline in London amid fragile market sentiment. Copper initially rallied but was unable to hold onto these gains at the close. Shanghai is going into the hardest phase of lockdowns, weighing heavily on sentiment as local authorities vow to bring the Covid wave under control at the community level by the end of this week. Meanwhile, the China Car Passenger Association (CAPM) confirmed that retail passenger vehicle sales plunged by 36% in April, its biggest monthly decline since March 2020. LME aluminium prices continue to fall and have largely ignored a steep decline in on-warrant stocks and a large number of cancelled warrants from Asia, signalling further declines. As of Tuesday, on-warrant stocks have fallen to a record low of 294kt, whilst total closing stocks dropped to 560kt - the lowest since 2005. Antaike has reported that China’s aluminium demand fell 5.5% YoY to 3.3mt last month (the biggest decline since March 2020), primarily impacted by the closure of auto producers due to Covid-related lockdowns. In contrast, the impact on Chinese supply has been rather limited so far, with operating capacity rising to 40.31mt by the end of April. As we also pointed out yesterday, Antaike also believes that the recent Covid outbreak has had a larger impact on demand than the early 2020 lockdowns. Agriculture Data from Brazil’s sugar industry group, UNICA show that sugar production in Center-South Brazil increased to 934kt over the 2nd half of April 2022 compared to only around 127kt over the first half of April as more mills started operations; although it is still significantly lower than the 1.52mt of sugar produced over the same period last season. Sugar cane crushing was down around 20% YoY to 23.8mt over the period with the sugar mix falling to 37.2% compared to 44.5% a year ago. Cumulative sugar production so far this season in CS-Brazil is down around 51% YoY to 1.1mt, reflecting a slow start to the crushing season. High energy prices continue to be supportive for ethanol production with mills allocating more cane towards biofuel supply. TagsSugar Russia-Ukraine Natural gas EIA Covid-19 China   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Summary: Gold prices rose the past week in the wake of a weakening US Dollar. Concerns around cotton supply persist. NGAS prices are still rising as concerns around supply persist Read next: Demand For Brent Crude Oil Rises, Silver Prices Rise, Improved Corn Crop Eases Supply Concerns  Gold (XAAUSD) prices on the rise The US Dollar had a softer start to the week amidst concerns around a slowing economy and the possibility of a recession. On Tuesday U.S benchmark yields rose as equities rallied. Investors seem to be seeking safer investments such as gold as the market awaits the Fed Chairs comments on key economic data, such as, PCI and first quarter GDP. Therefore, the price of gold is rising. XAUUSD Jun ‘22 Futures Price Chart Cotton futures prices Cotton prices dropped from their 11 year peak of $158 in early may. There are still concerns around supply as the droughts in Texas continue and global protected supply numbers are also falling, whilst demand is remaining stable in the post-covid world. Cotton Jul ‘22 Futures Price Chart Increased demand for NGAS is pushing up the price There is a higher international and domestic demand for Natural gas, which is driving the price of the NGAS futures up. The world is experiencing an energy shortage in the wake of Russia’s war on Ukraine. However, higher production and exports (especially in the US) should help limit the upward price momentum going forward. NGAS Jun ‘22 Futures Price Chart Read next: ECB Offering The Euro Support (EUR/USD), Strengthening Of The Renminbi Supporting The EUR and GBP, SNB Turns Hawkish (EUR/CHF) - Good Morning Fore  Sources: finance.yahoo.com, tradingeconomics.com

Summary: Gold prices rising amidst market uncertainty. Natural gas futures rose to their highest price since August 2008. Demand for cotton is softening due to inflationary pressures and rising prices. Read next: Saudi Arabia Hike Brent Crude Oil Prices, Demand For Safe-haven Assets Is Supporting Silver Prices, Corn Prices At 8 Week Low  XAUUSD expected to rise Gold prices rose during early trading on Tuesday, this rally is expected to last as projections of an economic slowdown pave the way for higher gold prices. A strong mix of talks of a global recession, decades-high inflation and geopolitical tensions should increase the demand for gold due to its safe-haven properties. The rise in gold comes after two days of declining prices thanks to a stronger US Dollar and rising treasury yields. XAUUSD Price Chart Natural Gas facing declining production On Tuesday Natural gas futures rose to their highest price since August 2008, this comes in the wake of higher international demand and declining production. As the northern hemisphere goes into summer, the need for cooling has strengthened which has been a driver for rising prices in the short term. On a global scale, the war in the Ukraine has caused a global energy shortage. The European Union is calling on the U.S to increase their exports to Europe to help lessen the region's reliance on Russian gas. NGAS Jul ‘22 Futures Price Chart Demand for Cotton softens Cotton prices have fallen amidst hopes of higher supplies due to favourable weather conditions in the top growing regions. Cotton crop planting is ahead of schedule giving hope around strengthening yields. In addition, it seems that demand for cotton is softening due to inflationary pressures and rising prices. Cotton Oct ‘22 Futures Price Chart Sources: finance.yahoo.com, tradingeconomics.com

Summary: Cotton is at its lowest price since last September. Rising inventories causing Natural gas to close at its lowest level since mid-March. Gold prices falling as central banks continue with aggressive monetary policy tightening. Read next: https://www.fxmag.com/commodities/concerns-over-tight-supplies-is-driving-brent-crude-oil-prices-up-silver-prices-falling-favourable-weather-weak-demand-tight-supplies-factors-driving-corn-prices  NGAS prices dropping in the wake of rising inventories Rising inventories causing Natural gas to close at its lowest level since mid-March. The US domestic market has gained an additional 2 bcf of NGAS per day since the explosion at Freeport LNG, according to the company it is expected to return to partial operational capacity in October. During the week ended 24th June, the extra fuel gave utilities the opportunity to inject 82 bcf into underground storage, according to EIA, which beat the median estimate of 74 bcf. NGAS Aug ‘22 Futures Price Chart As major central banks continue with aggressive monetary policy tightening, Gold is falling Gold prices fell below the $1,800 mark during Tuesday's trading day in the wake of pressures from imminent interest rate hikes by major central banks and a strong US Dollar. The Federal Reserve bank confirmed market expectations for an extended monetary policy tightening path, with some policy makers even advocating for another 75bps hike in July in an attempt to lower consumer prices. Simultaneously, the European Central Bank (ECB) has also pledged to start raising interest rates in July and is expected to bring its deposit interest rate into the positive side during the third quarter. In addition, tighter financial conditions amongst major economies increased fears of a global recession, pushing investors towards the safety of the dollar and prompting a broad decline in commodity prices. Gold Aug ‘22 Futures Price Chart Cotton prices impacted by slowing economies Cotton is at its lowest price since last September in the wake of heightened fears of a recession amidst lower demand prospects. The inflation sensitive commodity is due to be negatively impacted by the slowdown of economic activity and consumption As major global central banks are raising rates to fight inflation. In addition, adding to the weighing on the prices is a better crop outlook as favorable weather conditions boosted hopes of good yields in top growing regions. Cotton Oct ‘22 Futures Price Chart Sources: finance.yahoo.com, tradingeconomics.com

It was a volatile start to the week for energy markets. European natural gas prices sunk, whilst oil moved higher. The next week will be key for markets. For natural gas, we will need to see whether flows along Nord Stream restart later in the week following maintenance. For oil, OPEC+ will hold its monthly meeting on 5 September to discuss supply policy Corn prices have seen significant strength over the last week Energy: oil rallies on growing supply risks ICE Brent is now trading convincingly above US$100/bbl, after settling more than 4% higher yesterday. The market appears to be getting increasingly nervous about growing supply risks from Libya. This is after fighting broke out in the capital, Tripoli, in recent days. Until now there have been no reports that this fighting has impacted the oil supply. However, with Libya pumping around 1.2MMbbls/d, the market is somewhat nervous about potential supply disruptions. Although, given how volatile Libyan supply has been in recent years, one would think that there was some level of risk premium already priced into the market. In addition, market participants might be reluctant to short the market at the moment, given the uncertainty in the lead-up to the OPEC+ meeting on 5 September. This is particularly the case given that the Saudi energy minister said that the group may have to cut output, with a dislocation between the physical and paper market. Since then, a number of other OPEC members have backed Saudi comments. So, potentially, the next meeting could be quite interesting, although it will be difficult to justify cutting output when Brent is trading above US$100/bbl. However, we continue to believe that potential intervention from OPEC+ provides a floor to the market, which is not too far below the recent lows. European natural gas prices came under significant pressure yesterday. TTF settled almost 20% lower, although prices are still trading at more than EUR270/MWh. Following the higher prices run, it seems there has been some profit-taking. From a fundamental point of view, little has changed to justify the scale of the move. Although given the uncertainty and limited liquidity in the market, prices are likely to remain trading at elevated levels with a large amount of volatility. Possibly contributing to the weakness were reports that the European Commission will come up with a proposal to address the significant strength that we have seen in European power prices. Any action which caps power prices will limit the profitability of burning gas for power generation, which could possibly feed through to lower gas demand. At the moment, spark spreads provide little incentive for gas demand destruction from the power generation sector. Finally, Russian gas flows along Nord Stream are set to stop tomorrow (31 August) for three days of maintenance at a compressor station. The market will be eagerly watching to see if flows restart once maintenance comes to an end. Currently, Nord Stream is only operating at about 20% of capacity, and Gazprom has said that flows will return to these levels once the work is complete. If flows do restart when stated, it could provide a bit further downside to European prices in the immediate term. Metals: Fed hawkishness weighs on metals While the LME was closed for a holiday yesterday, prices in early morning trading today have come under pressure, with copper breaking below US$8,000/t. Sentiment in broader financial markets remains downbeat following the hawkish comments from the Fed at the end of last week. As for aluminium, Henan Zhongfu has restarted idled aluminium capacity in Sichuan province in China. The company shut down some of its capacity on 14 August due to power shortages. Large-scale industrials in the region have gradually started resuming operations, following an easing in emergency energy measures. This move should weigh on aluminium prices, although clearly there are still plenty of supply risks for the market, given the high energy price environment in Europe. Mysteel reported that Tangshan located in North China’s Hebei province aims to reduce crude steel output by 8.3mt (from last year’s level) in 2022. As per the latest target, Tangshan’s total crude steel output should not exceed 122.8mt this year, when compared to 131.11mt last year. Cumulatively, crude steel output rose 0.7% year-on-year to 74.7mt in the first seven months of the year. Agriculture: US corn concerns linger The USDA’s latest crop progress report shows that for the week ending 28 August, just 54% of the US corn crop is rated good-to-excellent, which is down from 60% at the same stage last year. Corn prices have seen significant strength over the last week, particularly after the Pro Farmer crop tour suggested that corn yields for the US crop will likely be lower than what the USDA is currently forecasting. Pro Farmer is expecting corn yields to average 168.1 bu/acre compared to the USDA’s forecast of 175.4bu/acre. As a result Pro Farmer expects US corn output to total 13.759 billion bushels, compared to the 14.359 billion bushels that the USDA is currently forecasting.   Canada is likely to see a strong recovery in crop production this year on the back of favourable weather and higher acreage due to stronger prices. In its first estimates for the year, Statistics Canada forecasts wheat production to increase by around 55% YoY to 34.6mt in 2022/23, although this is still lower than the 35.4mt produced in 2020/21. Corn production is estimated to increase by around 6% YoY to 14.8mt in 2022/23. Read this article on THINK TagsPower shortages Oil Natural gas Corn Aluminium Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

There is plenty going on in energy markets at the moment, which should keep prices volatile . The market has largely ignored the G-7 agreeing to a Russian oil price cap, instead focus is on today’s OPEC+ meeting. In addition, supply concerns in the European natural gas market have grown once again, with Nord Stream gas flows not resuming Energy - OPEC+ likely to keep output targets unchanged G-7 nations agreed on a price cap for Russian oil at the end of last week. This is an idea that has been pushed for several months now by the US with the hope that it would offer some relief to the oil market. However, looking at the price action since the announcement (prices have moved higher), it is pretty clear that the market is not convinced that the cap will work. The idea of the cap is to allow buyers to access G-7 and EU insurance and shipping services for Russian oil, if the price is at or below the price cap. However, there are still a lot of obstacles and unknowns regarding the cap. Firstly, EU members will have to accept the proposal and changes will need to be made to the sanctions package. It could be difficult getting all member states to agree to this latest proposal. Secondly, and even if all EU members agree to the cap, G-7 nations need to ensure that buyers are willing to take part in the price cap plan to make it effective. This means that larger buyers such as China, India and Turkey would need to take part. There is no guarantee they will, particularly after Russia has said that it will not supply any country who follows the price cap. In addition, a big unknown is what price level the cap will be set at. It is pretty clear that it will need to be set above Russian production costs, otherwise there is little incentive for Russia to maintain production at current levels. Finally, monitoring and enforcing the price cap will be a significant challenge as well. While there is plenty of uncertainty over Russian flows, there is also quite a bit of uncertainty over OPEC+ output policy and what the group will decide today at its monthly meeting.  Previous comments from the Saudi energy minister suggested that the group may have to cut output due to a dislocation between the physical and paper markets. Several OPEC producers have since echoed these comments. However, we believe that OPEC+ will leave output targets unchanged for next month. It is difficult to justify cutting output when the market is trading near US$100/bbl. In addition, Russia is reportedly against cutting output as it sends the wrong signal to the market about the supply and demand picture. Furthermore, it would make more sense for OPEC+ to wait for further clarity on Iranian nuclear talks before taking any action. These talks appear to have taken a turn for the worse, with the US saying that Iran’s latest response was “not constructive’. Finally, we are likely to see further volatility in the European gas market this week. And this is after gas flows along the Nord Stream pipeline did not resume over the weekend, following maintenance. Gazprom claims that an oil leak at the Portovaya compressor station means that the Nord Stream pipeline will be fully shut down “until the operational defects in the equipment are eliminated”. Prior to last week’s maintenance, Nord Stream was operating at only 20% of capacity. The halting of flows means that Europe will lose close to 1bcm of natural gas supply per month. The market will now likely become increasingly nervous about flows via Ukraine as well as TurkStream. What is clear is that the more Russia reduces gas flows to Europe, the less leverage they have over Europe. Metals - more supply woes for aluminium While most industrial metals ended lower on Friday, LME aluminium managed to eke out a small gain due to persistent supply risks (especially from Europe and China as the power crisis lingers). As per the latest reports, Dutch aluminium smelter Aldel is going to suspend its remaining capacity due to high energy prices and a lack of government support. The smelter has an annual production capacity of 110kt for primary aluminium and 50kt for recycled aluminium. Meanwhile, there are some concerns that Yunnan province in China could see some similar power rationing to what has been seen in Sichuan province, due to lower hydro power output. Yunnan province is home to a large amount of aluminium smelting capacity, which stands at around 5.6mtpa, accounting for 12.7% of China’s total installed aluminium smelting capacity according to Shanghai Metals Market. Novelis Inc. joins the list of industrials trying to avoid exposure to Russian metal since the invasion of Ukraine. A new tender issued for 2023 supply to its European plants specifies that no metal of Russian origin would be allowed as part of any deal. Existing Novelis contracts won’t be affected by the new conditions and would allow the supply of Russian metal. The latest CFTC data shows that speculators increased their bearish bets in COMEX copper by 3,544 lots over the last reporting week, leaving them with a net short position of 8,312 lots as of last Tuesday. Moving to precious metals - speculators decreased their bullish bets in COMEX gold by 9,600, to leave them with a net long of 20,726 lots at the end of the last reporting week. Agriculture – speculative interest in corn remains high It was another week of strong buying interest from speculators in CBOT corn as adverse weather in the US and parts of Europe is keeping current crops in poor condition and is weighing on supply prospects. CFTC data shows that money managers increased net longs in CBOT corn by 39,251 lots over the last week, with them holding a net long of 221,467 lots as of 30 August. The move higher was predominantly driven by fresh longs, with the gross long position increasing by 30,446 lots.  Meanwhile, the managed money net long in CBOT soybeans fell by 2,670 lots over the week to 101,801 lots last week, whilst the managed money net short in CBOT wheat declined by 3,822 lots over the week, to leave net shorts at 22,247 lots. Ukraine has increased exports of agricultural products to around 5mt in August according to Ukraine’s Ministry of Infrastructure, which has been driven by a ramping up of shipments through sea ports. Ukraine reportedly shipped around 1.7mt of product through the three ports that opened after the Russia-Ukraine deal, around 1.6mt through the Danube port, and rest by rail and road . Ukraine aims to increase exports to around 8mt in September. Read this article on THINK TagsRussian oil price cap Russia-Ukraine OPEC+ Nord Stream Gazprom Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

European stock markets are plunging at the start of the week following a day of mixed trade in Asia, with Gazprom’s announcement on Friday weighing heavily on the bloc. In the USA there is a bank holiday, Euro goes down as Nord Stream 1 is shut down A bank holiday in the US often results in relatively quiet trade everywhere else but that’s certainly not looking the case today. The decision not to restart gas flows via Nord Stream 1 after an oil leak was apparently discovered has created enormous uncertainty in Europe going into the winter. The euro slipped to a new 20-year low against the dollar in response to the shutdown. The decision conveniently came hours after the G7 agreed to an oil price cap and as countries announced they’re ahead of schedule in filling gas reserves. Many would argue it was only a matter of time until the decision was taken, with Europe having been squeezed over a number of months for one reason or another. There have been reports that Gazprom could increase deliveries via Ukraine as a result of the shutdown but it’s not clear whether this would be enough to offset the loss of Nord Stream 1. And considering Siemens has claimed that such a leak would not ordinarily affect the operation of a turbine and is easily fixed, you have to wonder whether Russia would actually take that decision. A painful winter lies ahead. A massive job for the incoming UK PM The UK will discover who its new Prime Minister will be today, with Liz Truss the standout favourite to win the run-off against Rishi Sunak. Whoever is victorious, the job facing them is enormous, with the economy facing a long recession and eye-watering inflation. Alleviating one while not exacerbating the other will be the first job for the incoming Prime Minister and it won’t be easy, to put it mildly. There’s a huge amount of pessimism around the UK at the moment, as evident by the pound, which looks on course to fall to its lowest level since 1985 against the dollar. Chinese headwinds strengthen China is also facing numerous headwinds going into the end of the year, with Covid once again creating huge uncertainty. Beijing’s commitment to its zero-Covid policy has created major challenges for the economy this year and with mass testing taking place over the weekend and lockdowns being extended in Chengdu, that’s going to persist. ​ The pressure is being felt in the yuan which fell for a sixth month in August and is continuing to fall against the dollar. That’s despite the best efforts of the PBOC which continues to set the yuan fix stronger than markets expect. To make matters worse, US President Biden is reportedly weighing up measures to limit US investment in Chinese tech firms. The US is becoming increasingly hawkish toward China and the latest move is another blow to its tech space. Major support being tested Bitcoin is continuing to show resilience around $20,000 but that’s really being put to the test as risk aversion sweeps through the markets once more. It’s down 1% so far today and trading a little below that crucial support level. A significant break at this point could be really damaging, with the following key level below here being the June lows around $17,500. Considering the outlook for risk appetite in the near term, it’s not looking good. For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/ This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Risk aversion sweeps across Europe - MarketPulseMarketPulse

The euro fell below the 0.9900 line earlier in the European session but has pared its losses. Currently, EUR/USD is trading at 0.9937, down 0.19%. Euro falls on Nord Stream 1 shutdown US  markets are closed for the Labour Day holiday. A US holiday often means a quiet day for the currency markets, but not today. Last week, investors were warily keeping an eye on the latest energy crisis development in Europe. Russian officials shut down the Nord Stream 1 pipeline on Wednesday, citing the need for three days of maintenance. Saturday came and went, and the pipeline remains closed, with Moscow now claiming an oil leak in a turbine. Germany has countered that the pipeline is fully operational, stoking fears that Russia is again weaponising energy exports to Europe. The predictable result has been renewed fears of an energy crisis, which sent the euro to a new 20-year low of 0.9876 earlier today. Germany has greatly reduced its dependence on Russian gas Even if Moscow does restore service, this episode is a reminder of Europe’s energy dependence on an unreliable Russia. Germany has greatly reduced its dependence on Russian gas, from 55% prior to Russia’s invasion of Ukraine to just 26%, but if Russia chooses to play hardball and cut off gas supplies, the result will be a full-blown energy shortage for Europe this winter. There were a host of releases out of Germany and the eurozone today, and the weak data didn’t help the euro at all. Eurozone and German Services PMIs both weakened in August with readings of 49.8 and 47.7, respectively. This points to a contraction in business activity. Eurozone Sentix Investment Confidence remains in deep freeze, and fell to -31.8, down from -25.2 and below the forecast of -27.5. Finally, eurozone retail sales declined -0.9% YoY in July, following a -3.2% reading in June (-0.7% est.)  The soft numbers point to weakness in the German and eurozone economies. The highly-anticipated US nonfarm payrolls on Friday turned out to be a whimper rather than a bang, as the economy produced a solid 315 thousand new jobs, edging above the forecast of 300 thousand. The reading will enable the Fed to continue its aggressive rate-tightening cycle as it relies on a robust US labour market. EUR/USD Technical EUR/USD is testing support at 0.9888. Below, there is support at 0.9816 There is resistance at 0.9984 and 1.0056 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Euro hits 20-year low on oil shutdown - MarketPulseMarketPulse

The European natural gas futures jumped 30% yesterday, the euro fell further against a broadly stronger US dollar, and crude oil climbed above the $90pb mark, as OPEC decided to cut production by 100’000 barrels per day, to the August levels, as they wanted to ‘stabilize’ oil prices after the longest price decline since the beginning of the pandemic. For now, the barrel of US crude couldn’t clear the $90 resistance, as the US-Iran nuclear deal is still a possibility to boost supply, and no one really knows what could happen in the complex politics of the oil market. Also, the recession worries weigh on the demand outlook. The New PM Of United Kingdom - Liz Truss In the UK, Liz Truss won the PM race. Cable first fell to a fresh low, on the back of a broadly stronger US dollar, but the pair rebounded. The Reserve Bank of Australia (RBA) raised its policy rate by 50bp as expected today. China boosted stimulus.  The US is back from Labor Day holiday. US futures are in the positive, but winds could rapidly change direction. Watch the full episode to find out more! 0:00 Intro 0:30 Crude oil gains after OPEC cuts output, but gains remain limited 2:21 France joins Germany and UK in backing windfall taxes on energy companies 3:56 Pound digests Liz Truss victory 6:32 RBA lifts rates by 50bp, as China boosts stimulus 7:31 Is Chinese property crisis a risk for global financial markets? 9:44 What to watch today? Ipek Ozkardeskaya   Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #OPEC #Europe #energy #crisis #crude #oil #USD #EUR #GBP #inflation #UK #PM #election #Liz #Truss #RBA #AUD #rate #hike #China #stimulus #property #crisis #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary ___ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr ___ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 ___ Let's stay connected: LinkedIn: https://swq.ch/cH

This week looks rather paradoxical  for the European gas market as it started with October Dutch TTF Gas futures prices surging to €245.92 per MWh from €214.67 per MWh at Friday’s close. This jump was expected as Russia’s Gazprom warned it would not resume gas deliveries via its Nord Stream 1 pipeline after the completion of three days of on-site technical maintenance on the pipe. The only turbine that was under maintenance from September 1 until September 3 was stopped due to oil leaks and is expected to be returned to German Siemens energy, a maintenance contractor. Dmitry Peskov Accuses Sanctions Of Gas Flows Stoppage On this news gas prices surged with a gap on Monday. Russia’s president spokesman Dmirty Peskov blamed European sanctions that are supported by the United Kingdom and Canada for the lack of Russian gas supplies. And that is where the price paradox comes in as gas prices failed to reach a previous all-time high at €346.52 per MWh that was last seen at the end of August when Gazprom first announced the three-day maintenance works that would be conducted on the only turbine that pumps gas via Nord Stream 1. Siemens Says The Turbine's Issue Is Not Preventing It From Normal Operating Now the European gas market looks very different and, on September 6 Dutch TTF October Futures prices dropped below €217 per MWh, although they slightly recovered during midday on Tuesday. And these paradox price movements could be considered rather expected as Gazprom has lost its status as a reliable gas supplier as it is interrupting its gas flow.. Siemens Energy said that oil leaks do not affect normal pipeline operations and they could be taken care of on-site without much fuss. “Such leaks do not normally affect the operation of a turbine and can be sealed on site," Siemens Energy said in a statement. The company said it is prepared to conduct on-site maintenance once it has been asked to do so.    Read next: Interest rates hiked. The most important indicators continue their downward trend| FXMAG.COM   Europe Is Gearing Up So, it is clear that the Europeans were ready for such a situation to occur. Even a long-term complete shutdown of the Nord Stream 1 pipeline for any “technical” reasons would hardly contribute further to the negative impression that Gazprom has now created for itself as an unreliable supplier. Such a global shift in the attitude towards Gazprom has pushed the EU to push measures into motion which will diminish the dependency the union has on Russian pipeline gas supplies. A New Liquefied natural gas (LNG) terminal is emerging in EU ports as Europe increases LNG imports. Russian LNG supplies are growing too, as they are being resold by China. New interconnection pipelines between EU nations are being set into operation. Nuclear plants and coal power stations are being put back into operation. Steps towards green energy transformation are also accelerating while some austerity energy savings measures in EU nation that suggest a decrease in energy consumption up to 15% are close to be implemented.  Meanwhile, the EU has filled up its gas storages up to 80% of its maximum capacity ahead of schedule. All these measures have capped gas prices and may continue to limit them to €190-240 per MWh this week.   Disclaimer: Analysis and opinions provided herein are intended solely for informational and educational purposes and don't represent a recommendation or investment advice by TeleTrade.

Despite a hawkish Riksbank, SEK may struggle to recover before next year. Europe’s energy crisis is impacting Sweden both directly and indirectly, while global risk sentiment remains unstable. Riksbank’s FX reserve build-up may also get in the way of a near-term recovery. This week’s general election shouldn't have much impact on the currency Source: Shutterstock Sweden isn't immune from Europe's energy crisis Sweden is far from immune from Europe’s energy crisis and rising recession risk. That’s perhaps a little surprising, given Sweden uses little-to-no gas in its power system and uses relatively little for domestic heating either. Instead, the country relies predominantly on hydro (in the north of the country) and nuclear power (in the south). And in the case of the former, reservoir levels are fuller than usual for this time of year, despite drought conditions in much of Europe. That typically bodes well for keeping power prices in check. But the reality is the energy system isn’t balanced. Hydro-rich Luleå in the north, one of Sweden’s four electricity bidding zones, has typically paid less than 30 EUR/MWh for power in recent months. However, in the much more populous south, which saw nuclear power plant closures last year, prices have topped 300 EUR/MWh in recent days. The reality is that the electricity grid in southern regions is often reliant on imported power, which in some cases comes from gas-powered generation. It’s these areas that account for the vast majority of Sweden’s power usage, and these prices have often proven closely comparable to Germany and other European countries. Sweden's electricity prices vary dramatically across the country Source: Macrobond, ING   The bottom line is that Sweden is just as exposed as many of its neighbours to energy price spikes this winter. And that means that, like the eurozone, Sweden is likely heading for a recession – even if it's a mild one. Consumer confidence has hit all-time lows, and real consumer spending has begun to inch lower. A contraction in house prices is also underway, where the sharp rise in mortgage rates is affecting the 40-50% of customers on a floating rate. Riksbank should remain hawkish For the time being, this isn’t getting in the way of aggressive Riksbank tightening. The jobs market is exceptionally tight right now, and that’s very important ahead of multi-year wage negotiations due to conclude in coming months. Almost 90% of Swedish employees are covered by collective bargaining, and inflation expectations among both employer/employee organisations have spiked. An agreement that locks in faster wage rises over the next three years, compared to the last set of negotiations that took place in the midst of the pandemic, is likely and is at the heart of the Riksbank’s argument for hiking rates. We expect a 75bp rate hike at the September meeting, which partly reflects a need to front-load hikes, but is also because the Riksbank has fewer scheduled meetings than many of its counterparts. It has to make each meeting count. SEK recovery delayed as European growth worries mount Despite the central bank’s hawkish pivot this year, the krona has been the worst performing G10 currency (-15% vs USD) after the Japanese yen since the start of the year. The reasons are well known: the Ukraine conflict, the equity sell-off, and an ever-worsening outlook for Europe on the back of high energy prices and inflation. We had held a relatively sanguine approach on pro-cyclical currencies like SEK for most of the year, assuming a rather optimistic base-line scenario for the global economy and risk sentiment. Recent developments have convinced us that what appeared to be short-term woes before the summer are now more serious and long-lasting concerns, especially when it comes to Europe’s recession risks. The implications for SEK are big. With our economics team now expecting a eurozone recession around the turn of the year and flagging a very elevated risk of the gas supply crisis extending into the next year, SEK’s role as a proxy trade for European sentiment as a whole is set to limit its ability to stage a major recovery.   In our view, this story will prevent EUR/USD from climbing back to 1.05 before early next year, and given SEK’s high sensitivity to Europe’s growth outlook, we forecast EUR/SEK at 10.60 in 4Q22. In the coming weeks, the balance of risks remains tilted to the upside, and a further deterioration in risk sentiment could prompt a re-test of July’s recent high (10.78) and potentially March’s highs (10.86). In 2023, some improvement in the eurozone’s story and the end of global tightening cycles should help pro-cyclical currencies, including SEK, to re-appreciate. A calmer market environment may also revamp the search for carry and allow SEK to benefit from its relatively more attractive rate profile compared to EUR. As shown in the chart below, the 2-year EUR-SEK swap rate differential (which mirrors the ECB-Riksbank policy divergence) is the widest in favour of SEK in nearly a decade. We expect a gradual return to 10.00 over the course of 2023, although geopolitical and energy-related developments do pose non-negligible risks to this profile. Policy divergence points at weaker EUR/SEK Source: Refinitiv, ING Riksbank adding pressure on SEK with reserve build-up While the likes of the ECB and Bank of England are vocally protesting against their weak domestic currencies, the Riksbank’s acceleration in FX reserves build-up since February (from SEK 5.5bn to SEK 11.6bn per month) may well have exacerbated SEK weakness. Even more crucially, it does send a counterintuitive signal to markets as a weak currency neutralises the anti-inflationary effects of monetary tightening. However, Riksbank’s Deputy Governor Martin Floden recently ruled out any tweak to FX purchases as – he said - reserve management is independent from monetary policy.  Assessing the effective impact of the Riksbank’s FX purchases on SEK is quite hard, especially in a period of elevated FX volatility. Since the end of 1Q22, the Riksbank’s foreign currency reserves have risen by SEK 88bn, and if the reserve composition has remained the same as of April 2022 (chart below), and we exclude valuation effects, the Riksbank would have sold around SEK 55bn versus USD and SEK 18bn versus EUR in five months. We think the ongoing FX build-up could help keep a cap on SEK in the near term, but we doubt that would be able to counter any strong macro-driven recovery in 2023. Riksbank has accelerated FX reserves accumulation Source: Riksbank, ING Election unlikely to have material impact on currency Sweden goes to the polls on Sunday, and it’s looking highly uncertain. The incumbent Social Democrats are polling at roughly the same level as in 2018 at roughly 30%. But broken down by the two potential broad coalitions or groupings, it’s virtually neck-and-neck. Having said that, the impact on the broader financial market is less clear. Economic issues haven’t dominated the campaign, and perhaps surprisingly it’s crime and the country’s migration policy, that has instead been the central focus. And while the election has the potential to deliver a more right-leaning government, Sweden is among the most favourable towards the EU among member states, according to Pew Research. A tight election race Source: Various polls, ING Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Metals have received somewhat of a boost, with supply risks growing and some optimism in Chinese construction. For energy markets, all attention will be on EU energy crisis talks today Source: Shutterstock Energy - EU energy crisis talks today The oil market yesterday managed to recoup some of its declines from earlier in the week. ICE Brent continues to trade below US$90/bbl and the market will be watching for any signs from OPEC+ of possible intervention. The partial recovery in the market comes despite fairly bearish EIA numbers. The EIA reported that US commercial crude oil inventories increased by 8.85MMbbls over the last week - the largest increase seen since April. When you factor in the SPR release, total US crude oil inventories increased by a more modest 1.32MMbbls. An increase in crude imports, lower exports and lower refinery utilization (due to the BP Whiting outage) over the week all contributed to the crude build. Despite lower refinery activity, gasoline and distillate fuel oil stocks increased by 333Mbbls and 95Mbbls respectively. European gas prices continue to trade in a volatile manner, with TTF breaking below EUR200/MWh at one stage yesterday, only to finish the day above EUR220/MWh. The market will be sensitive to developments today, given that EU ministers will be meeting to go through proposals to tackle the energy crisis. These proposals include various forms of a price cap, along with potentially mandatory demand cuts not just for gas but also the power market. Liquidity measures for European power companies will also be pretty high on the priority list. As we have mentioned before - while price caps will offer some relief to consumers, it doesn’t help the market try to balance itself through demand destruction.   Metals – Escondida strike lifts copper prices LME copper prices ended the day higher, amid reports of potential mine strikes in Chile. Workers at BHP’s Escondida, the world’s largest copper mine, voted to go on a partial strike from next week over safety concerns, according to the mine’s union. The strike will result in a partial stoppage on 12 and 14 September and will be followed by an indefinite strike lasting until a deal with BHP is reached. Spread action also suggests a tightening in the prompt copper market. The LME copper cash/3m backwardation reached US$145/t (highest since November) yesterday, compared to a backwardation of US$76/t a day earlier and a contango of US$7.75/t at the start of 2H22. Vale SA raised its nickel production guidance to reach 230-245kt per year in the medium term, higher than its previous forecast of 200-220kt in May, the battery metal producer announced. In the long-term, Vale expects annual nickel production to reach over 300kt to tap into the growing demand for the metal. In ferrous metals, the most active SGX iron ore contract moved above US$100/t yesterday amid hopes of a recovery in construction activity in China. According to the latest market reports, the Chinese city of Zhengzhou will resume all stalled housing projects by 6 October, by making use of special loans, asking developers to return misappropriated funds, and encouraging some real estate firms to file for bankruptcy, according to Reuters reports. Read this article on THINK TagsOil Nickel Natural gas Energy crisis Copper Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

We aren’t seeing much change in Europe ahead of the open on Tuesday after a broadly positive session in Asia as China, Hong Kong and South Korea returned following the bank holiday weekend. The last few days have seen a notable improvement in market sentiment. It’s not always easy to pinpoint what’s driving such a turnaround but the fact that it’s happening in the days leading up to the US inflation report is certainly interesting. Perhaps last month’s report has given investors confidence that another faster deceleration could be on the cards for August. That may sound premature but the fact is that two consecutive reports showing a sharp deceleration combined with last month’s goldilocks jobs report will be a really encouraging sign and could trigger a broader risk rebound in the markets. It may not be enough to tip the Fed balance in favour of a more modest 50 basis point rate hike next week but it may slow the pace of tightening thereafter. The Ukrainian counteroffensive in previously Russian-controlled territories in the east and the south, most notably in Kharkiv, may also be lifting sentiment. Pressure will mount on the Kremlin and while there’s no saying what its response will be, there’s certainly more hope that momentum is moving back in favour of Ukraine. Meanwhile, Europe is putting together plans to cope with higher energy prices this winter with the UK joining others in setting a cap on energy bills. While that won’t solve the problem of supplies or generate as much demand destruction, it will protect many households and businesses that otherwise wouldn’t have been able to cope this winter and could save the UK from recession. If not, it will no doubt make it much less severe. Not what the BoE wanted to see It’s not often that you see the unemployment rate fall to the lowest in almost 50 years and aren’t overjoyed, but that will certainly be the feeling at the Bank of England right now. The decline in the rate was driven by a decline in the labour force, while employment rose by only 40,000; far less than expected. What’s more, wage growth accelerated faster than expected, hitting 5.5% including bonuses in the three months to July compared with the same period last year. Less labour market slack and faster wage growth increase the odds of a 75 basis point hike from the MPC next week, especially against the backdrop of higher core inflation expectations over the medium term as a result of the new cap on energy bills. Can it build on the recovery? Bitcoin is holding onto gains ahead of the inflation data. The recovery has been very strong until this point but it may need a favourable report in order to hold onto them. A positive inflation number could see bitcoin add to recent gains with the next major test to the upside falling around $25,500. For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/ This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Nerves ahead of US inflation - MarketPulseMarketPulse

Oil rebound brief as gas spikes amid sabotage on Nord Stream pipelines Oil prices rebounded on Tuesday but that proved to be only a brief correction as economic doom and gloom has driven them lower again this morning. With Brent trading only a little above $80 and WTI below, you have to wonder how much more OPEC+ will tolerate and the size of output cut they may be considering next week in light of the new economic outlook and price. Read more: Tim Moe (Goldman Sachs) Comments On USD And Turbulent Times For Markets In General, Ole Hansen (Saxo)Talks Nord Stream | FXMAG.COM Gas prices have also been highly volatile in light of the latest developments on Nord Stream One and Two. While the latter was never likely to come online and the former unlikely as flows have been gradually reduced to zero over the course of the year, the apparent act of sabotage on both kills any hope of additional gas along those routes. The question for many is therefore what the sabotage sought to achieve, occurring around the inauguration of a pipeline that will deliver Norwegian gas to Poland. Gold slipping again on a stronger dollar Gold is falling again as yields rise and the dollar rallies once more on Wednesday. The yellow metal has been hammered by the repricing of interest rate expectations recently and is now threatening to break below $1,620, with support next appearing around $1,600. It’s now fallen more than 20% from its highs this year and could have further to go yet before we see peak inflation and rates priced into the market. For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/ This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Oil pares gains, gold loses ground - MarketPulseMarketPulse

The euro is in negative territory today, after posting six straight days of losses. EUR/USD is trading at 0.9553 in Europe, down 0.41%. Referendums, Nord Stream explosions weigh on euro September can’t end fast enough for the euro, which has declined a massive 4.8% against the dollar. Earlier today, EUR/USD fell to 0.9536, its lowest level since June 2002. With the war in Ukraine escalating and Nord Stream reporting that its pipeline was deliberately damaged, it’s hard to be optimistic about the euro’s outlook. The sham referendums in Russian-occupied Ukraine have ended and predictably, the vote to join Russia was close to 100%. Moscow is expected to declare on Friday that the territories are being annexed to the Russian Federation, sparking fears that Russia could resort to nuclear weapons to defend what it claims is Russian territory. There was a further escalation in the Ukraine war last week, as explosions at the Nord Stream 1 and 2 pipelines are suspected to have been sabotaged. Nord Stream 2 has been shelved and Nord Stream 1 has been shut down for weeks, and any faint hopes that Russia might renew gas exports through Nord Stream have been dashed. European natural gas prices have jumped in response to the news. The US dollar continues to rally, and 10-year Treasury yields pushed above 4.00% earlier today, for the first time since 2008. The markets are showing a healthy respect for Fed hawkishness, even after inflation weakened in the past two inflation reports. There is some optimism that the current rate-tightening cycle is reaching its end, with Fed member Evans stating that it will be appropriate to slow the pace of tightening at some point. For now, the US dollar has momentum, driven by an aggressive Fed and weak risk appetite. Euro To USD Technical EUR/USD is testing support at 0.9554. Next, there is support at 0.9419 There is resistance at 0.9640 and 0.9711 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. EUR/USD falls to new 20-year low - MarketPulseMarketPulse

Dutch TTF GAs is breaking below key support at €125 in a total collapse. Henry Hub Gas eyeing Shoulder-Head-Shoulder target at $5.32.  Sideways trading Carbon Emission could break deadlock and drop further Dutch Gas is collapsing. After closing below €145 the big test was 125. Gas has now broken below that minor support right at the open this morning supporting the view that Dutch Gas prices are collapsing.  There is no strong support in Dutch Gas before around 83.75 -77.30.RSI is below 40 adding to the bearish picture.Dutch could bounce and perform a minor correction from the falling lower trendline in what looks like a steep falling wedge pattern.To reverse this bearish picture Dutch Gas needs to close above 175. Source: All Charts and data in this article Saxo Group Henry Hub Gas closed yesterday below key support at $6.30 and could be in free fall to July lows around 5.32. Henry Hub would then have reached its Shoulder-Head-Shoulder target illustrated by the two vertical arrows. To reverse this continued bearish picture Henry Hub Gas must close above 7.20.   Carbon Emission has been stepping sideways for several weeks by now. However, that might soon change. Emission prices are likely to resume down trend if it breaks below 65 followed by RSI closing back below 40. RSI is showing bearish sentiment and currently testing its lower corrective rising trendline.For Carbon Emission to reverse the downtrend a close above 71.36 is needed. Source: Technical Update - Natural Gas prices collapsing breaking key supports. Carbon Emission warming up for another sell-off | Saxo Group (home.saxo)

Day ahead European natural gas prices have fallen by as much as 82% this month. Milder weather and the continued filling up of storage have eased immediate supply concerns. However, 2023 will be a tougher year for European gas markets, particularly over the 2023/24 winter Milder weather in Europe is easing immediate supply concerns Prompt natural gas prices collapse European gas prices are collapsing as we head into the winter season. TTF day-ahead prices have fallen as much as 91% from their peak in August, trading to their lowest levels since June 2021. TTF next-hour prices fell briefly into negative territory recently, reflecting a very well-supplied spot market. Weaker prices will come as a relief to consumers and politicians in the EU. Milder than usual weather for this time of year has meant that heating demand has been lower, whilst also allowing EU gas storage to continue to fill up. According to data from Gas Infrastructure Europe, EU gas storage is now more than 94% full. Not only is this above the five-year average, but it is also well above the EU’s initial target of having storage at 80% full by 1 November this year. Meanwhile, German storage is almost 98% full. While the weakness in prices provides some relief to consumers, a concern is whether lower prices will stimulate demand once again. European fertiliser producers have already started to bring back curtailed capacity, following the recent weakness in prices. If we see this happening on a larger scale, clearly Europe’s efforts to refill storage next year will be more difficult. There are still concerns for Europe over the longer term, particularly through 2023 and into 2024. The front end of the TTF forward curve is in significant contango with Feb-23 TTF futures trading in excess of EUR140/MWh (vs. day-ahead at between EUR40-45/MWh). The forward curve through 2023 until early 2024 remains fairly flat at these elevated levels. EU gas storage % full Source: GIE, ING Research Russian annual gas flows will be significantly lower in 2023 A significant increase in liquefied natural gas (LNG) flows and demand destruction (due to the high price environment) has ensured that the EU has built inventories at a good pace this year and also allowed the region to exceed initial targets. This has come at a time when Russian pipeline gas flows have fallen significantly. The latest data shows that year-to-date pipeline flows from Russia to Europe have fallen by around 50% year-to-year to roughly 58bcm. And, obviously, these flows have declined progressively as we have moved through the year with reduced flows via Ukraine and Nord Stream. Daily Russian gas flows to the EU are down around 80% YoY at the moment. So, if we assume no change in Russian volumes from the current environment (via Ukraine and TurkStream only), annual Russian pipeline gas to the EU could fall by a further 60% YoY to around 23bcm in 2023. And clearly, there is a very real risk that the remaining flows via Ukraine and TurkStream are halted. Russian pipeline flows to the EU (bcm) Source: ENTSO-G, European Commission, ING Research Not enough LNG to fill the shortfall The LNG market has helped Europe significantly this year. LNG imports in August made up 41% of total EU imports, a significant increase from 19% in August last year. However, there are constraints to how much more LNG Europe can import. There are reports that LNG carriers are queuing waiting for spots at regasification units. This highlights the lack of regas capacity in Europe at the moment. Although this queue of LNG carriers could also be partly due to market players wanting to take advantage of the significant contango in the front end of the TTF curve. The EU has seen the start-up of a fair amount of regasification capacity in the form of floating storage regasification units (FSRUs) over 2H22. The Netherlands, Germany, Finland/Estonia have or are in the process of starting up operations at these FSRUs with a combined capacity in the region of 23-27bcm. Whilst Germany is expected to bring a further 15bcm of regas capacity online early next year. This will help with some of the infrastructure constraints Europe is facing, but the issue is also around global LNG supply and the limited capacity which is expected to start up next year. Global LNG export capacity was set to grow by around 19bcm in 2023, driven by the US, Russia and Mauritania. However, following Russia’s invasion of Ukraine and the sanctions which have followed, it is likely that the start-up of Russian capacity will likely be delayed. The Russian capacity makes up for 46% of the total new capacity expected next year. Therefore, we could see just 10.5bcm of new supply capacity. The other issue for the EU is competition for LNG. This year, weak Chinese LNG demand has been a blessing for Europe. LNG imports from the world’s largest buyer were down 21% YoY over the first nine months of the year. This would have been due to the higher price environment as well as the demand impact from Covid-related lockdowns throughout the year. However, if we see a recovery in Chinese demand next year, Europe will have to compete more aggressively for supply. 2023 will be tight for Europe The pace of inventory builds during the 2023 injection season will be much more modest compared to what we have seen this year, given the reductions in Russian supply. The ability of the EU to turn completely to other sources is just not possible. Therefore, Europe is likely to go into the 2023/24 winter with tight storage, which will leave the region vulnerable next winter.   In order to get through the 2023/24 winter comfortably, we will have to see continued demand destruction. This will have to be either a result of market forces (prices needing to trade higher to reduce demand) or EU-mandated demand cuts (the 15% voluntary demand cut at the moment ends in March 2023). While Europe should be able to scrape through the 2023/24 winter if current Russian gas flows continue, it is much more challenging if remaining Russian gas flows come to a full stop. Therefore, we believe that there is an upside to current 2023 forward values, particularly those towards the end of 2023. Although much will depend on how much storage the EU drawdowns this winter, which obviously will depend on heating demand through the peak of winter. What could see prices trade lower over 2023? Firstly, if the mild weather we are currently seeing across large parts of Europe continues further into this winter, it would take some pressure off the market for next year. This could see Europe starting the injection season with already seasonally high storage. Secondly, a pick-up in Russian gas flows. However, in the current climate it is difficult to see this. Even if there was a will amongst parties to restore flows, operationally this would be difficult at least through Nord Stream, given the damage following the sabotage. Finally, government intervention is a risk. Although, in a market which is in structurally short supply, intervention will have limited success, in the absence of mandated demand cuts. Gas price caps which continue to be discussed will do little to help resolve the tightness in the European market, if anything they could add further tightness. Read this article on THINK TagsRussia-Ukraine Natural gas LNG European gas Energy crisis Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

The bulk of the complex came under pressure yesterday after Chinese health officials reaffirmed their zero-Covid policy. Meanwhile, milder than usual weather in Europe is set to continue for at least another week, which will delay the start of the heating season and provide further relief when it comes to spot gas prices Gas storage tank Energy - EU price cap on imported gas looking less likely Oil prices corrected lower yesterday after health officials from China made it clear that China will continue with its zero-Covid policy. Oil prices and the broader commodities complex have seen increased volatility in recent days after speculation that China could look to ease its strict Covid policy. The Chinese demand outlook is important for the global market. Global oil demand is expected to grow by around 1.7MMbbls/d next year and China is expected to make up almost 50% of this growth. There is plenty of uncertainty around how the domestic Covid situation develops and how authorities tackle any further outbreaks through 2023. Demand uncertainty for next year is not isolated to China. The deteriorating macro backdrop raises concerns over global growth. While 1.7MMbbls/d of demand growth might appear strong, it is important to remember that global oil demand is still trying to get back to pre-Covid levels.   The latest data from India’s Petroleum Planning & Analysis Cell shows that domestic oil products demand grew by 3.4% YoY to total 18.37mt in October - the highest monthly number since June. Gasoline consumption grew by 8.8% YoY to 2.99mt, whilst diesel consumption increased by 5.5% YoY to 6.98mt. Cumulative products demand in the current fiscal year (starting April) stands at 126.12mt, up 11.8% YoY. As for the European gas market, it appears that milder than usual weather will continue over the next week, offering relief to the region with it delaying the start of the heating season. EU gas storage continues to tick higher with it more than 95% full, whilst in Germany storage is effectively full, standing at more than 99.5%. The contango at the front end of the TTF curve remains wide. Day ahead prices are trading at a little over EUR65/MWh, whilst Feb-23 prices are trading in excess of EUR120/MWh. While milder weather has helped the European market for the upcoming heating season, there are still serious supply concerns for next year. According to Bloomberg, the European Commission held further discussions with member countries on Monday related to the ongoing energy crisis. According to the report, the Commission appears to  be against pushing ahead with a price cap on imports of natural gas. Capping the price on gas imports is a risky move with it potentially leading to reduced gas flows to the region. LNG suppliers could redirect flows to markets which are trading above the EU’s price cap. Metals – Copper imports in China remain weak amid softening demand Copper traded lower on Monday amid poor trade numbers from China and after the government reaffirmed its zero-Covid policy stance, dampening hopes for any relaxation in the world’s biggest consumer of industrial metals. China released it preliminary trade data for metals yesterday. Total monthly shipments for unwrought copper fell 20.7% MoM and 1.5% YoY to 404kt in October. On a year-to-date basis, unwrought imports were still up 8.8% YoY to total 4.82mt in the first ten months of the year. Imports of copper concentrate declined 17.7% MoM, although still up 3.8% YoY to 1.87mt in October. Cumulatively, imports rose 8.4% YoY to 20.8mt over the first ten months of the year. Iron ore imports declined 4.7% MoM to 95mt last month, while cumulative imports so far this year totaled 917mt, down 1.7% YoY. The latest data from LME shows that, on-warrant copper stocks rose by 2.95kt (biggest daily increase in a month) taking the total to 45.5kt as of yesterday. Meanwhile, total exchange inventories declined for an eleventh straight session, falling 4.05kt to 84.55kt. Agriculture – China's soybean imports decline to the lowest in eight years Trade data from China Customs shows that soybean imports in October fell 46% MoM and 19% YoY to 4.14mt (lowest since October 2014), due to weak crush margins and drought delaying US shipments. Cumulatively, soybean imports have declined 7.4% YoY to 73.2mt over the first ten months of the year. While Chinese soybean crush margins were in negative territory for much of the summer months, they did move back into positive territory in September. The latest crop progress report from the USDA shows that the US winter wheat crop is now 92% planted, above last year’s level and the 5-year average of 90%. However, the condition of the crop is more of a concern. 30% of the winter wheat crop is rated good-to-excellent, which is below the 45% rated this condition at the same stage last season. Read this article on THINK TagsWheat Oil Natural gas Copper China trade Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Oil Crude prices softened but didn’t break as energy traders await how supplies will be disrupted when the Russian crude price cap begins early next month. ​ Today’s oil price weakness was mainly attributed to a weakening short-term demand outlook by OPEC and nervousness that the Fed could still remain aggressive with raising rates. Warmer weather across Europe has been good news for natural gas prices and that has removed some of the extra demand that was expected to come crude oil’s way. ​ The warm weather however is about to go away and that could keep energy prices rising going forward. ​ ​ ​ Gold Gold’s rally appears to be running out of steam. ​ The Fed remains the key driver for gold prices and this week could see a strong round of hawkish pushback from the policymakers. The Fed’s Waller kicked off the week with some hawkish talk that reminded traders we need to see a couple of more strong drops with inflation to say policymakers can pause. ​ Gold appears to have strong resistance at the $1800 level, with decent support at the $1750 region. ​ This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Oil weakens, gold rally losing steam - MarketPulseMarketPulse

Introduction Natural gas is the third most important energy resource in the world. For years, the gas market has been dependent on long-term supply contracts, which is why gas prices have been relatively stable. Everything has changed by increasing the supply of liquefied LNG gas. Russia is one of the largest players in the global gas market, using its resources as an economic and political weapon against European countries. The pandemic, the desire to further cut emissions and the war in Ukraine have made gas one of the key instruments on global financial markets. In this report, we will show what is responsible for the massive increase in gas prices in Europe and the US, and what the future of the natural gas market may look like. Why is the topic of gas popular? Gas is considered the least emitting fossil fuel in the world. What's more, unlike coal or nuclear power plants, gas-fired power plants can be turned on and off very quickly, which allows for great flexibility in building the energy mix in individual countries. That is why gas power plants became very popular in Europe and in the United States when coal power plants began to be abandoned. At the same time, gas is the most popular raw material for heating houses. The topic of gas is currently very popular - mainly due to Russia's aggression against Ukraine and the ongoing war. Due to the fact that European countries were heavily dependent on Russian gas supplies, gas prices immediately "shot up" because supporting Ukraine in this conflict could end up "turning off the tap", which eventually happened anyway. Read next: Wealthy clients are withdrawing assets from Credit Suisse accounts| FXMAG.COM However, the beginning of this situation took place much earlier. Germany's decision to build the Nord gas pipeline Stream has led to a significant drop in gas production across the European Union. Production has been reduced by up to half compared to the peak levels before the financial crisis of 2008-2009. This has led to an increase in the dependence of European Union countries on Russian gas supplies by almost 40%. Interestingly, when the EU countries reduced their production and increased gas imports from Russia, the shale revolution began in the United States, which clearly changed the energy mix in this country. Meanwhile, Germany, wanting to become even more dependent on Russian gas and be able to resell the raw material to other European countries, decided to build the second branch of the Nord system streaming . Even despite the annexation of Crimea by Russia in 2014, this project has not been suspended. The hard winter during the pandemic led to low stock levels The next stage of this story is the pandemic and the reduction of gas imports due to the decline in economic activity in Europe. What's more, the hard winter during the pandemic led to low stock levels. At the same time, Russia stopped selling gas on the spot market in Europe and limited the filling of its own warehouses in Germany, which was most likely a preparation for the possibility of blackmailing Europe at the time of aggression against Ukraine. Russia finally invaded Ukraine in February 2022, and although it initially honored its long-term supply contracts, at one point demanded payment for gas in rubles. Moscow suspended deliveries to countries that did not agree to these conditions (including Poland, the Netherlands, Denmark and Bulgaria), and then, citing technical problems, reduced and finally suspended deliveries also to Germany. In the fourth quarter of 2022, Russia maintains only limited supplies via the Ukrainian gas pipeline and the Turkish gas pipeline. At the end of September 2022, three gas pipelines were probably intentionally damaged The last act of the story is sabotage related to the Nord system streaming . At the end of September 2022, three gas pipelines were probably intentionally damaged, which was supposed to further destabilize the situation in the region. As a result of sabotage, 3 lines of the Nord Stream can be turned off even for several years. Heavy dependence on Russian gas and other raw materials such as oil and coal led to the fact that Europe faced the biggest energy crisis in history, associated with high prices and unavailability of raw materials. The level of gas in storage facilities in the European Union at the beginning of this year was below the average for the last five years. The specter of the crisis encouraged EU leaders to fully fill their warehouses before the winter. In the chart above, we can see the forecast of warehouse filling, assuming a complete suspension of supplies from Russia and the absence of new sources of supply and consumption in line with the five-year average. As you can see, in such a scenario, there will be no shortage of gas in Europe throughout the heating period. Source: Bloomberg, XTB

Global gas market What is natural gas? Natural gas is considered one of the most effective energy sources in the world. Gas is used primarily for the production of electricity, heating and in industry. It is characterized by a low degree of impact on the natural environment, as emissions from its combustion are two times lower than in the case of coal. As a result, gas has become the preferred source of energy in European Union countries that are striving to significantly reduce greenhouse gas emissions in the coming years. What's more, with current consumption, global gas reserves - similarly to oil - are expected to last for more than 50 years, which is half as much as in the case of coal. However, this relatively long period is to be devoted to further energy transformation, during which fossil fuels are to be replaced by renewable energy sources. According to the annual BP energy report, the largest gas reserves in the world are held by Russia (24.3%), Iran (17.3%), Qatar (12.5%), the USA (5.3%) and Saudi Arabia (4.2%). What else is worth knowing about natural gas? Natural gas is lighter than air! This is due to the fact that it is largely composed of methane Natural gas has no smell! In order to prevent the gas from escaping, special chemicals are added to it, which are responsible for the characteristic smell Natural gas is found in the same regions as oil. Often both of these resources are mined at the same time Natural gas used in industry is not only used as fuel for power plants, but it is also used to produce chemical products, including fertilizers Natural gas is considered the cleanest fossil fuel, but if extracted from shale, there is a risk of earthquakes and excessive water consumption in the hydraulic fracturing process The biggest producers, consumers Russia, as the owner of the largest reserves of natural gas in the world, was also the largest producer of this raw material for years. However, discoveries of large deposits in Australia, Arab countries or shale gas in the USA have led to a reshuffling of the table of the largest gas producers. Even at the beginning of this millennium, the United States was a net importer of this resource, and most of the electricity produced came from burning coal. The shale revolution that has taken place in the last dozen or so years has led to the fact that the USA has become the largest producer, consumer and one of the largest exporters of natural gas. The gradual abandonment of coal in order to reduce carbon dioxide emissions into the atmosphere has made gas the preferred raw material on the green agenda of the European Union. Europe became increasingly dependent on gas - especially Russian. Russian gas was cheap, which led to the gradual abandonment of its own production. In recent years, dependence on Russian gas has reached nearly 50% for EU countries and over 50% for the entire continent. The development of LNG technology allowed for cost reduction, which led to imports of more and more gas from Qatar, Australia and the United States. Norway is also a significant producer and exporter to European countries. This country is responsible for supplying gas primarily to Great Britain, Germany, the Netherlands and soon also to Poland. How to analyze the natural gas market? Natural gas is analyzed in a very similar way to other commodities, although there are some differences. More attention is paid to transport due to its many forms. Due to the seasonal use of natural gas, attention is also paid to weather forecasts and stock levels. What should you pay attention to when analyzing the natural gas market? Relationship between demand and supply Specificity of the local market (the gas market is not as homogeneous as the oil market) Long and short-term supply contracts Mode of transport - gas pipeline or LNG? Connection network and development of export and import terminals Relations between exporters and importers Seasonality of the market related to the weather The level of stocks in relation to seasonality Changes in stock levels relative to averages and relation to price Natural gas and LNG gas Due to its state of aggregation, natural gas cannot be transported by ships or road transport (to a large extent). Gas is transported through gas pipelines, the construction of which obviously takes years and, among other reasons, long-term contracts for supplies are signed. This is why flexibility in supply is very low, even with such an extensive gas pipeline network as in Europe. The situation is different in the case of LNG, because liquefied gas can be delivered to almost any place in the world that has access to the sea and has an import terminal or uses the so-called floating terminal. LNG is produced by strongly cooling natural gas so that it reaches a liquid state, thanks to which its size is reduced by about 600 times compared to its gaseous state. One gas, many markets Due to the fact that the gas market is not homogeneous, we distinguish a few of the most important benchmarks in the world. They are: Henry Hub in USA EU TTF (Netherlands) NBP in Great Britain JKM in Japan and South Korea European gas is mainly traded between commercial market participants with some involvement of hedge funds . This market is not available to a retail investor, as is the case with NBP or JKM gas. There is also no TTF, NBP or JKM gas ETF available. For this reason, by far the largest trading in the futures market takes place in the United States, which is also available to the individual investor. Although there are certain dependencies between all benchmarks, American natural gas is governed by its own laws, which is why global financial institutions mainly analyze the American gas markGas prices in the US, EU, UK and Asia. As you can see, gas prices in the European Union are still at the highest level, which is why it is a very competitive market for American natural gas, which is up to six times cheaper than the aforementioned European gas (excluding the costs of LNG transport). Source: Bloomberg, XTB Please note that information and research based on historical data or results do not guarantee future profits.

It's going to be a resillent week as they're not many crucial macroeconomic events in the schedule and investors, traders and companies are awaiting the decisions of all of major central banks in the world. Even if volatility isn't dominating today's headlines it's good to dwelve into situation on the markets as gas prices are falling in the US and EUR/USD may be on the verge of a trend reversal. As a week before, we're pleased to ask Finimize's Luke Suddards to speak his mind. Natural Gas (NATGAS) plunges, have markets got calmer at last? Gas prices are falling as storage levels remain high and temperatures have been warmer. It looks as if price wants to test the $5 level. Volatility still remains high and colder weather over January and February could see the natural gas bulls come back into town.    Read next: Investors also seem to have become less sensitive to the Ukraine War, which was a significant driver of crude in the first half of 2022 says Finimize's Luke Suddards | FXMAG.COM   Are you of the opinion that EUR/USD price movement suggests a trend reversal? Yes, in the short term it does seem as if we're seeing EURUSD reverse its downtrend and it is now above its 200-day SMA. The euro is a pro-risk currency and as long as we see equities rallying into year-end we could see EURUSD reach 1.10. The other factor to consider is expectations around the Fed. We saw the jobs data out last Friday coming in hotter than expected, particularly the wage pressures. The next major risk event for FX traders will be US inflation data out on 13 December. If that surprises to the upside then we likely see the terminal rate revised higher and a higher probability of a 75bps hike priced in for the Fed's next meeting. December is far and away the euro's best month. EURUSD has gained in 14 of the past 20 Decembers, and all of the past five. The average gain is around 1.3% with a hit rate of 70%. 

Specifics of the American market The United States is essentially self-sufficient in natural gas. There are gas pipelines to Canada and Mexico, and there is mutual exchange due to the size of the entire continent and a less extensive network of connections than in the case of Europe. The United States obtains the vast majority of gas from shale, therefore, in the context of long-term prospects, the number of drilling rigs and the number of fracturing crews are being analyzed. However, gas deposits are much larger than in the case of oil, so the number of towers does not change too dynamically. The largest consumers of natural gas in the US are households and power plants. Above 1/3 of electricity in the United States is produced from gas, so when gas consumption increases dramatically, the price of the raw material can react. This is the case, for example, during summer periods when the use of air conditioning reaches peak levels. Due to the shale revolution, the United States has become an important player in the LNG market. The vast majority of gas was sent to Asia, but the war in Ukraine changed this situation and Europe became more important. This is why the correlation between European and US gas prices has increased. Seasonality and weather Gas is also the most important source of home heating, which is why its highest consumption during the year takes place in the winter. This is when gas futures prices are at their highest. On the other hand, the increased use of air-conditioning in the summer may lead to greater price anomalies on the market. How do prices on the natural gas market usually move? The first phase of growth begins in early or late spring, due to the appearance of weather forecasts for the summer season, and usually ends at the beginning or during the summer The second wave of increases begins at the end of summer or the beginning of autumn and usually lasts until the turn of October and November, i.e. at the start of the heating season What are the conclusions? Building expectations is crucial for gas prices, which is why weather forecasts play the biggest role in creating market volatility. On the other hand, later execution associated with a change in stocks causes a trend to be maintained or a correction in case of excessive expectations. We can illustrate the seasonality of gas prices on the xStation 5 platform with two indicators - the average price behavior ( seasonal trends ) and a histogram of changes in a given time range ( histogram seasonals ). The greatest seasonality in the case of gas prices can be seen in the autumn period and the related building of expectations before the heating season. Source: xStation 5 Please note that information and research based on historical data or results do not guarantee future profits. Stocks Gas stocks are by far the most important factor in gas prices. Change in stocks is the difference between production and consumption, which in turn is divided into domestic consumption and exports. Stocks must be built up before the winter period, as gas consumption in these months is greater than production capacity. Demand for gas is basically shaped mainly by the weather and does not depend much on the price. Price trends have a greater impact on production, as higher gas prices determine the willingness to invest more. Changing stocks gives us an idea of the joint behavior of supply and demand. How do we analyze inventory? Stock change and analysis if it is seasonal Inventory seasonality and analysis against previous years and long-term average Comparative stocks, ie the behavior of current stocks relative to the average and compared to prices Weekly change of gas stocks Max Average (2017-2021) Min 2022 The seasonality of inventory changes alone is key to analyzing short-term price volatility. A significant deviation from the average shows a change in fundamental factors. In addition, we see that the largest increase in inventory has place in spring and autumn. Source: EIA, XTB Gas in underground storage (billion cubic feet) Max Average 2021 2022 Inventory trend analysis against historical data is crucial in assessing price pressures. For 2022, we are seeing a strong departure from both the average and the previous year, which has driven prices to levels not seen since 2008, when the US was still one of the world's largest gas importers. Source: EIA, XTB Comparative stocks and relation to gas price Gas stocks - five-year average Natural gas (USD/ MMBTu ) As you can see, there is quite a significant relationship between the direction of changes in the level of inventories and the price of natural gas. If current inventories are lower than the five-year average (inverted left axis), we should see upward pressure on commodity prices. However, if inventories are rising relative to the five-year average, there is significant oversupply in the market and downward pressure on the price. The situation at the end of 2022 does not look extreme, but geopolitical issues keep the price close to 15-year highs. Source: Bloomberg, XTB Please note that information and research based on historical data or results do not guarantee future profits.

Not only does gas price declines in Europe, but also in the USA, but we could say it's not in favour of indices. Euro seems to be in an unclear situation and on the cryptomarket, Porsche is set to launch its NFT collection. FXMAG.COM team once again reaches out to FxPro's Alex Kuptsikevich to have a detailed look at the mentioned threads. Natural Gas (NATGAS) plunges, have markets got calmer at last? It makes sense to estimate that lower energy prices would be good for markets as it mitigates inflation risks while reviving economic growth - the best combination for markets. However, US indices rallied throughout October and November, while the US gas price first dipped from $6.9 to $5.5 by the end of October but then soared to $8, along with increased traction in risky assets by the end of November in the last two months. Over the past two weeks, the gas has returned to $5.5. Half of that time, stocks were rising, and half of that time, they were declining. Germany's DAX40 is up 22% from its lows at the start of October and has retreated 1.8% from its six-month high since early December. The rise has occurred despite the euro's strengthening, and the decline comes along with the fall in oil and gas prices. Read next: To Simplify The Organization, Pepsico Will Lay Off Thousands Of Workers At The Headquarters In The USA | FXMAG.COM Falling gas is not helping the indices right now, as the fear of falling demand due to a weakening economy is behind the decline, which is equally bad news for both stocks and commodities.    Are you of the opinion that EUR/USD price movement suggests a trend reversal? EURUSD has been rising since late September, although it has occasionally stumbled. Important technical signals of a broken trend were the strong strengthening at the upward cross of the 50-day moving average, which is a signal of capitulation for position traders. At the end of November, the EURUSD had lingered near the 200-day MA for a long time, but on November's last trading day, it crossed up this line. Strictly speaking, the EURUSD recovery fits into the Fibonacci retracement pattern, touching 61.8% of the decline from the peak in May 2021 to the bottom in September 2022. Also, 1.05 looks like a nice round where there might be another round of profit taking from the last 10-figure rally.  Read next: Turbulent times on crude oil market. Nasdaq shrank by 2%, Apple and Amazon lost more| FXMAG.COM Nonetheless, the dollar rally looks outdated, having exhausted the fundamental drivers. Europe has begun to catch up with the US regarding rate hikes, and signals from the Fed are getting softer.   Porsche has just announced their own NFTs. It's one of the most prominent brands in the world - would it mean NFT market isn't 'dead' yet and prices may bounce some time in the future?  This market is not dead, but just hibernated during this crypto winter. At some point in the future, the market will change its pessimistic attitude towards NFT. Markets are cyclical, and while we shouldn't expect a repeat or intensification of the NFT euphoria as it was in 2021, the overall capitalisation of this market could almost certainly rewrite its peaks in the next three years. Admittedly, there will be fewer random people in this market as it increasingly takes on the traditional traits of collectables markets. The only difference is that NFTs are collections of unique digital goods.

On Saturday we woke up in a cold Europe with heavy snowfall in some regions. As USA Today reports, similar weather conditions are present in across the ocean what once again raises the issue of gas prices which seemingly increased on Monday morning. Courtesy of Ole Hansen (Saxo Bank) we're able to have a detailed look at the the circumstances. Winter strikes again - the weekend turned out to be cold and snowy in Europe and the USA with more to come. What's ahead of NATGAS (which opened higher on Monday) and Dutch? Ole Hansen (Head of Commodity Strategy): The current volatility in gas prices, both up and down, and both in the US and Europe, highlights the impact of weather developments. An incoming cold spell in the US has seen the cost of US gas surge 27% during the past three trading session while in Europe the benchmark Dutch TTF gas contracts remain below €150, primarily supported by strong arrivals of LNG and a pick up in nuclear power production in France. The weather outlook points to a colder than normal winter and if realized it will keep gas prices elevated in Europe in order to attract supplies from LNG and to keep demand from consumers and industry as low as possible. Read next: Rivian Break Down Of Joint Venture Negotiations With Mercedes | Amgen Inc. Begins Action to Acquire Pharmaceutical Company Horizon Therapeutics| FXMAG.COM By this time last year gas inventories across Europe had already fallen 162 TWh from its 858 TWh peak. So far this year, the mild start to the autumn supported a strong build up in inventories, and despite the recent surge in demand, inventories has so far only seen a 79 TWh reduction from a 1068 TWh peak. This has left gas in storage, some 40% above the levels seen this time last year, so in other words plenty of gas to go around still, hence the reason why the main pain is currently being played out in the power market where volatility from wind production is causing a great deal of volatility.

As energy prices soared in 2022, the gap between energy-efficient homes and those with higher energy consumption widened more than ever before. In this article, we look at three key scenarios for the cost advantage of efficient properties moving forward Source: Shutterstock   Higher energy prices have recently increased the cost advantage of energy-efficient homes, which is one of the many reasons why such properties are generally sold at above-average prices. Together with the rise in energy costs, the price differential between energy-efficient homes and those with high energy consumption has also increased. Our scenario analysis shows that the cost advantage could significantly increase if natural gas prices remain structurally high. In our high-price scenario, the expected cost savings for a terraced house of 130m² would rise to almost 34,000 euro. This is the maximum amount that homebuyers will be willing to offer for an energy-efficient home due to lower natural gas costs. Elevated gas prices could therefore increase the price difference between efficient homes and those with high energy consumption in the longer term. The cost advantage Since the beginning of the war in Ukraine, natural gas prices have risen sharply. The consumer price of natural gas averaged around 3.26 euro per m³ in October, compared to an annual average of 0.77 euro in 2019. Higher natural gas prices increase the cost advantage of energy-efficient homes, strengthening their relative attractiveness in the housing market. This seems to be reflected in house prices, as the price gap between energy-efficient homes and homes with high energy consumption has recently widened. Price of natural gas 4.3 times as high as in 2019 Consumer price of natural gas per month (incl. taxes) in euros per m³ Source: National Statistics   Sales prices for energy-efficient housing Previous research has shown that energy-efficient homes are sold at a higher price than average compared to those with high energy consumption. The estimated price difference in these studies ranges from about 10,000 euro to over 50,000 euro. Expected savings in energy costs are a key factor here. Other reasons that home buyers are willing to pay more for energy-efficient properties include both the extra comfort of a well-insulated home and the reduced environmental impact of energy consumption. The ways in which energy prices will develop moving forward still remain very uncertain. To help provide some clarity, we have assessed their potential effect on the cost advantage of energy-efficient homes for three energy price scenarios. In all three scenarios, we calculate the net present value of the cost advantage of an energy-efficient dwelling compared to those with higher levels of energy consumption. The first step is to define what we mean by an energy-efficient home. 1 Defining an energy-efficient home We define an energy-efficient home as a well-insulated property with an A-label. The starting point is a terraced house – the most common type of dwelling in the Netherlands – of 130m². Due to the solid insulation, this house consumes relatively little heat. The average natural gas consumption of A-rated dwellings is currently estimated at 7.5 cubic metres of gas (m³) per square meter. This translates into an annual consumption of 975m³ for a terraced dwelling of 130m². How do we define an energy-efficient home? Source: ING Research   The opposite is a home with relatively high gas consumption. We define this as a poorly insulated, G-labeled property. Once again, the starting point is a terraced home of 130m². Due to the poor insulation, this dwelling consumes much more heat. The median natural gas consumption of houses with a G label is estimated to be around 12.9m³ per square meter, 65% more than a similar house with an A label. This translates to an annual consumption of 1,680m³ for a terraced home of 130m². 2 Three scenarios for energy price uncertainty Wholesale prices plus energy taxes ultimately determine household natural gas prices. In all three scenarios, we use the tax rates presented on Budget Day 2022 for energy taxes and the recently published rates for the planned energy price cap in 2023. The three scenarios in our analysis vary in both the number of years that wholesale prices remain high and the long-term average. The evolution of the conflict between Ukraine and Russia is important for short-term price developments, while in the longer term, the energy transition is a more significant factor. The more costly it is to find alternatives to natural gas, the higher energy prices will remain. For the middle scenario, we apply current market expectations (based on current forward market prices). In the low-price scenario, prices fall more quickly than expected, while in the high-price scenario, prices stay elevated for longer and remain structurally higher. If and when natural gas prices decline to previous levels is uncertain Three scenarios for the development of wholesale prices for natural gas, in 2023 prices, euro per m3 Source: National Statistics, ING Research   Even before higher energy prices increased the attractiveness of energy-efficient homes, these properties had a cost advantage. So in order to determine how this trend has actually developed, we need to use a reference scenario. This is a scenario of constant energy prices which shift around the historical long-term average over time (without the sharp rises seen over the last period). 3 Calculation of the cost advantage We calculate the cost advantage of an energy-efficient home as the net present value of the expected energy cost savings over time (in the case that home buyers choose this type of property over a dwelling with high gas consumption). We do this for all three energy price scenarios. Cost advantage increases by more than half in high price scenario In the reference scenario (with constant energy prices) the net present value of the expected energy savings of an energy-efficient dwelling is 21,800 euro. In the high price scenario, the net present value of this cost advantage increases by 55% to 33,900 euro. This shows that if energy prices remain structurally high, the cost advantage of an energy-efficient dwelling will increase significantly. Low price scenario: the cost advantage for an energy-efficient dwelling increases to around €23,000 (1,200 euro, or 5% more than in the reference scenario). Mid price scenario: the cost advantage for an energy-efficient dwelling becomes about €29,700 (7,900 euro, or 36% more than in the reference scenario). High price scenario: the cost advantage for an energy-efficient dwelling increases to over €33,900 (12,100 euro, or 55% more than in the reference scenario). Cost advantage of an energy efficient home increases by more than half in high price scenario Net present value of the cost advantage of an energy-efficient home compared to a home with relatively low natural gas consumption** Source: ING Research Other factors affecting the price premium The cost advantage is one of the major factors influencing the price premium of an energy-efficient dwelling. We mentioned earlier that the extra comfort and lower environmental impact could also explain why home buyers are willing to pay more for these properties. Additionally, not all home buyers are able to properly estimate the expected cost advantage of an energy-efficient home. Instead of applying future energy price scenarios, home buyers will tend to estimate the cost advantage of an energy-efficient home based on current energy prices. Periods with temporarily high energy prices then result in an overestimation of the cost advantage. Finally, policy also affects the price premium for energy-efficient housing. For example, higher renovation subsidies typically reduce the willingness of homebuyers to pay extra for an energy-efficient home due to the lower cost of investment in energy efficiency. Higher energy taxes and stricter minimum requirements on the energy efficiency of housing will, on the other hand, increase the relative advantage of energy-efficient homes. Read this article on THINK TagsHousing market Energy Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Natural gas and the stock market Key sectors for gas The significantly increased volatility of gas prices is of key importance not only for retail customers due to higher energy costs, but also for investors trying to take advantage of the current geopolitical situation. The main consumer of gas in the industry is the chemical sector, which uses blue fuel as a raw material in the production process (e.g. nitrogen fertilizers) and the energy sector. In the case of Polish companies, gas prices have a particular impact on two companies that use it as a raw material in the production process. Examples of companies (PL) PGNiG PGNiG is the main gas supplier in Poland - in 2021 it was responsible for 88.7% of the domestic natural gas market. The current situation on the gas market is not clear for the PGNiG Group. Admittedly, the drastic increase in gas prices significantly increases the company's profits in the mining business, but on the other hand, there may be problems with payments by gas recipients who will not be able to bear the growing costs of their operations. The company's key customers include: Orlen, Azoty, Lotos, PGE, KGHM, ArcelorMittal and PGNiG Termika. Grupa Azoty In the case of Grupa Azoty, which uses gas to produce nitrogen fertilizers, an important risk factor discounted by the market is the risk of blue fuel rationing, which has already happened in history. Grupa Azoty is the largest recipient of this raw material in Poland, consuming 2.3 billion cubic meters per year, which accounts for over 10% of the annual consumption in Poland. It is estimated that in PuÅ‚awy, which is dependent on Grupa Azoty, the gas price may account for as much as 40% of total costs. Recently, the drastic increase in gas prices has caused a significant reduction in production. The operation of the installation for the production of nitrogen fertilisers, caprolactam and polyamide 6 was suspended. The company reduced the production of ammonia to approximately 10% of its production capacity. Ciech Ciech is another leader in the Polish chemical industry. Up to a certain point, in the case of this company, Russia's decision to turn off the gas tap in Poland had no direct impact on it, as Ciech does not use this raw material in the production process in Poland. However, it does use it in production at its German Stassfurt plant , so the general increase in gas prices raises its production costs. Russia's latest decision to cut off gas flows from Russia to Germany via Nord Stream 1 and 2 can dramatically change this situation. The main activity of the company is the sale of soda ash, however, the price of gas in annual contracts cannot be fully hedged, which would have a negative impact on the margin given the increase in the price of this raw material. Read next: Greater demand for cheap American gas generated by European countries results in lower availability of gas in the country and a slower increase in inventories| FXMAG.COM Company Examples (Global) Range Resources Range Resource Corp. engages in the exploration, development and acquisition of natural gas and oil deposits in the Appalachian and Mid-Continent regions. The company was founded in 1976 and is headquartered in Fort Worth, Texas. Southwestern Energy Southwestern Energy Co. is a holding company that explores, develops and produces natural gas, crude oil and natural gas condensate (NGL). It operates in the Exploration and Production (E&P) and Marketing segments. The E&P segment includes operations in Northeast Pennsylvania, West Virginia and Southwest Pennsylvania. Shell Shell Plc produces crude oil and natural gas. The company operates in the following segments: Integrated Gas, Mining, Petroleum Products, Chemicals and Corporate. The Integrated Gas Segment includes liquefied natural gas, conversion of natural gas into liquid fuels and other products. Cheniere Energy Cheniere Energy, Inc. conducts activities related to liquefied natural gas (LNG). It owns and operates LNG terminals and develops, builds and operates liquefaction projects near Corpus Christi, Texas and at the Sabine Pass LNG terminal. The company was founded by Charif Souki in 1996 and is based in Houston, Texas. Results of selected companies against benchmarks Performance of selected US companies with exposure to natural gas against the benchmark A significant increase in gas prices supported the quotations of companies that are both producers and distributors of gas, especially on the US market. Investing in these stocks could yield a significant return from early 2022, especially in the face of the overall decline in the US stock market. The situation is different on the Polish market, but in this case the drastic deterioration of the geopolitical situation as a result of the outbreak of war in Ukraine, the risk of energy blackmail and the general outflow of capital towards safer markets are of importance.

Import and export The shale revolution in the USA made the United States not only give up coal in favor of gas, but also became a net exporter of this raw material. In 2021, gas exports reached record levels and it was the fifth year that the US exported this commodity than it imported it. American LNG was delivered primarily to Asian countries, but the tense situation in Europe led to a change in this situation. The US also supplies gas to Canada and Mexico via pipelines. Why is it worth watching gas trading data in the United States? Greater demand for cheap American gas generated by European countries results in lower availability of gas in the country and a slower increase in inventories, which in turn leads to increasing uncertainty before the winter season. Gas prices in Europe are 7 times higher than in the USA and recently also in Asia. With the ongoing development of LNG infrastructure, the situation in the US may become even more tense and lead to a narrowing of the gap between gas prices in the US and Europe. Since 2017, the United States has been a net exporter of natural gas, mainly due to the development of the LNG industry. Source: EIA, XTB Term curve As with other commodities, the majority of trading in the natural gas market is done through futures contracts. Contracts for energy resources are divided into monthly contracts due to the different demand during the year. Due to seasonality, price differences within one year can be really big. In the case of natural gas, the highest prices are recorded in the heating period, while the lowest are observed just after the period of higher consumption. Investors must keep in mind changes to the series of contracts, i.e. rolling, because the differences in the valuation of individual series can be really large. The difference resulting from contract changes is charged using swap points . It is worth noting the so-called “ Widowmaker spread ", i.e. the difference between the March and April series of contracts (end of the heating period). It can be really big, so when trading on the natural gas market, it is important to adjust the position size and the “ take profit” and “stop loss ” levels . Natural gas forward curve The forward curve on the natural gas market is the most specific of all commodities, which results from a clear seasonality. Futures contract valuations peak mainly in the autumn months, while the largest decrease in contract prices occurs between March and April. Source: Bloomberg, XTB Please note that information and research based on historical data or results do not guarantee future profits. Positioning of speculators Participants of the futures market are not only commercial investors, i.e. producers, distributors or recipients, but also professional investors. Of course, we can divide this group even more precisely, for example, between speculators and managers, but they are usually referred to as a whole group of non-commercial investors, or colloquially - speculators. Speculative investors follow the forecasts of the price itself, i.e. they buy contracts expecting gas price increases and sell them when they expect market decreases. The difference between the number of buy and sell contracts usually shows the general sentiment in the natural gas market. The key in this case are the zones of extreme overbought and oversold, which on the xStation 5 platform are depicted by the gray areas of the COT (Commitment of Traders) indicator. Extremely high and low COT levels can indicate potential turning points in the natural gas market. Source: xStation 5 Please note that information and research based on historical data or results do not guarantee future profits. Gas price prospects in the long and short term In recent years, gas has been a relatively volatile instrument, which was related to its wide availability and the possibility of diversification. The increase in prices on the commodity market related to the pandemic and then the war between Ukraine and Russia destroyed this order. Read next: A significant increase in gas prices supported the quotations of companies that are both producers and distributors of gas, especially on the US market| FXMAG.COM The US Energy Information Agency (EIA) operating at the Department of Energy (DOE) indicates that gas prices will remain at a high level throughout the upcoming heating period, and then the base will remain at a relatively high level in relation to previous averages. Gas prices in the US will most likely tend to catch up with the European price due to the high demand for gas in Europe. Nevertheless, in the foreseeable period, we will most likely experience a similar stabilization as in previous years, although the coming quarters will most likely see the upward trend on the gas market continue. Before the pandemic, the marginal cost for LNG supplies to Europe and Asia was calculated in the range of USD 5 to USD 8 per million British thermal units ( MMBtu ), so it can be expected that between these levels there is a potential low for gas prices, while the peak will depend on how much gas Europe will want to buy. Natural gas price forecasts (USD/ MMBtu) The short-term outlook for natural gas prices in the US points to maintaining high levels during the heating season, and then falling to a higher base than before the pandemic or post-pandemic period. Source: EIA, XTB Please note that information and research based on historical data or results do not guarantee future profits.

The eurozone’s improving inflation outlook could leave the ECB behind the curve Slowly but surely, the inflation outlook for the eurozone is improving. Headline inflation is normalising, but persistent core inflation is complicating things. While this remains the case, the European Central Bank will continue hiking interest rates – but for how long?   Inflation is moving in the right direction, but will core inflation remain stubborn? Headline inflation has come down sharply and is widely expected to continue to fall over the months ahead. The decline in natural gas prices has been remarkable over recent months, and while it would be naïve to expect the energy crisis to be completely over, this will result in declining consumer prices for energy. The passthrough of market prices to the consumer is slower on the way down so far, which means that there's more to come in terms of a downward impact on inflation. For food, the same holds true. Food inflation has been the largest contributor to headline inflation from December onwards, but recent developments have been encouraging. Food commodity prices have moderated substantially since last year already, but consumer prices are now also starting to see slowing increases. In April and May, month-on-month developments in food inflation improved significantly, causing the rate to trend down.   Historical relationships and post-pandemic shifts As headline inflation looks set to slow down further – at least in the absence of any new energy price shocks – the question is how sticky core inflation will remain. There are several ways to explore the prospects for core inflation.   Let’s start with the historical relationships between headline and core inflation after supply shocks. Data for core inflation in the 1970s and 80s are not available for many countries – but the examples below for the US and Italy show that an energy shock did not lead to a prolonged period of elevated core inflation after headline inflation had already trended down. In fact, the peaks in headline inflation in the 70s and 80s saw peaks in core inflation only a few months after in the US and coincident peaks in Italy. We know that history hardly ever repeats, but it at least rhymes – and if this is the case, core inflation should soon reach its peak.   During previous supply-side shocks, core inflation did not remain elevated for much longer than headline inflation

Beyonce bounce keeps a floor under UK CPI Just when you think it can't get any worse, and we thought that UK inflation was on a downward track, UK core CPI goes and jumps to a new 30 year of 7.1%, while headline inflation remained steady at 8.7%. Today's numbers are a further headache for the beleaguered Bank of England monetary policy committee and yet another stick to beat them with.    For a central bank, whose inflation target is 2% and who for so long were insistent that inflation was transitory there is a real risk that anything the central bank does tomorrow will be ignored by financial markets. There is no doubt these numbers are bad news for households as well as the mortgage market, which is already showing signs of strain.   Today's ONS numbers did point to a rather large jump recreation and culture and specifically fees to live music events.   Last week Sweden blamed the "Beyonce" effect for a surprise rise in their own headline inflation rates, and the same thing appears to have happened here in the UK with tickets going on sale for live performances to see Taylor Swift and Beyonce, during the month of May.   Restaurants and hotels also saw a lift during May, and this could have been down to the Coronation and the two bank holidays which provided a lift to that sector.     Food price inflation slowed to 18.3%, however we already know from the latest Kantar survey that in June this slowed to 16.5%, however the process remains glacial, but should continue to slow. The biggest concern is the continued increase in core prices with services inflation remaining sticky, rising to 6.3% from 6% in April.   A lot of this increase in services price inflation will be down to the paying of higher wages to staff, but we can also blame the energy price cap, which has meant that consumers haven't seen sharp falls in the cost of their energy costs straightaway, forcing them to push for higher wages.   This is probably why UK inflation is stickier than its continental peers.   Natural gas prices are already back at levels 2 years ago, yet consumers haven't seen that in their energy bills yet, even as fuel pump prices have. The energy price cap will see a fall in July, and some energy providers are cutting the direct debt payments of their customers already, but it's all so slow.   Amidst all this gloom there is room for optimism if you look at the trends in PPI which tends to be an indicator of where we are heading.   In May input and output prices came in negative month on month to the tune of -1.5% and -0.5%, while China and Germany are also showing increased signs of deflation, which should bring inflation down in the second half of this year. These have been weak all year, however markets aren't looking at these yet, and perhaps they should be because it's likely we'll see inflation come in much lower.    UK gilt yields have jumped sharply on the back of these numbers, with 2-year yields back above 5% and their highest levels since 2008.   Today's numbers have also increased the prospect that we might get a 50bps rate hike, instead of 25bps from the Bank of England tomorrow, pushing bank rate to 5%, to try and get out in front of the narrative, and convince then markets of their determination to hit their 2% target.   Sadly, for the Bank of England that ship has sailed, as very few believe anything they have to say anymore, with financial markets pricing in the prospect of a 6% base rate by the end of this year. As for tomorrow's Bank of England rate decision we could well see the bank raise rates by 50bps instead of the 25bps which is expected.  If we do get 50bps it's quite possible, we may not need a rate hike in August, if the inflation data does start to show signs of easing.   In conclusion, while today's numbers are worrying it's also important not to implement a knee jerk response, when we know part of the reason inflation is sticky is due to the energy price cap. This will come down in July, and in all honesty should be consigned to the dustbin, as its not reactive enough when prices fall.     By Michael Hewson (Chief Market Analyst at CMC Markets UK)

Bank of England set to raise rates again, but by how much?      European markets fell for the third consecutive day yesterday, after the IFO in Germany warned that a recession would be sharper than expected in the second half of the year, and UK core inflation unexpectedly jumped to a new 32 year high. US markets also fell for the third day in a row after Fed chairman Jay Powell doubled down on his message from last week to US lawmakers yesterday, that US rates would need to rise further to ensure inflation returns to target.   This weakness in US markets looks set to translate into a lower European open, as we look towards another three central bank rate decisions, from the Swiss National Bank, Norges Bank and the Bank of England all of whom are expected to raise rates by 25bps today. Up until yesterday's CPI number markets were predicting with a high degree of certainty that we would see a 25bps rate hike from the Bank of England later today.   That certainty has now shifted to an even split between a 25bps rate hike to a 50bps rate hike after yesterday's sharp jump in core CPI to 7.1% in May.   As inflation readings go it's a very worrying number and suggests that inflation is likely to take longer to come down than anticipated, and even more worrying price pressure appears to be accelerating, in contrast to its peers in the US and Europe where prices now appear to have plateaued.   This has raised the stakes to the point that the Bank of England might feel compelled to hike rates by 50bps later today, and not 25bps as expected. Such an outcome would be a surprise from the central bank given their cautious nature over the years, however such has been the strong nature of recent criticism, there is a risk that they might overreact, in a sign that they want to get out in front of things. Whatever they do today it's not expected to be a unanimous decision, but the surge in core inflation we've seen in recent months, does make you question what it is that Swati Dhingra and Silvana Tenreyro are seeing that makes them think that the last few meetings were worthy of a no change vote.    In the absence of a press conference to explain their actions a 50bps rate move would be a risky strategy, as it could signal they are panicking. A more measured response would be to hike by 25bps with a commitment to go more aggressively at the next meeting if the data warrants it. The big problem the bank has is that they won't get to see the July inflation numbers, when we could see a big fall in headline CPI, until after they have met in August, putting us into the end of Q3 until we know for certain that inflation is coming down. The resilience in UK core inflation has got many people questioning why it is such an outlier, compared to its peers, however if you look closely enough the reason is probably staring us in the face in the form of UK government policy and the energy price cap, which has kept gas and electricity prices artificially high for consumers.   If you look at the price of fuel at the petrol pump it is back at the levels it was prior to the Russian invasion of Ukraine, due to the slide in oil prices from their peaks of $120 a barrel, with consumers already benefitting from this disposable income uplift into their pockets directly in a lower bill when it comes to refilling the family car.    Natural gas prices have gone the same way, yet these haven't fed back into consumers' pockets in the same way as they have in the US and Europe.   This has forced employers here, in the face of significant labour shortages, to increase wages to attract the staff they need, as well as keep existing staff to fulfil their business functions. We already know that average weekly earnings are trending upwards at 7.6% and in some sectors, we've seen wage growth even higher at between 15% and 25%.    These increased costs for businesses inevitably feed through into higher prices in the cost of delivering their services, and voila you have higher service price inflation which in turn feeds into core prices, in essence creating a price/wage spiral.   It is perhaps a supreme irony that an energy price cap that was designed to protect consumers from rising prices is now acting in a fashion that is making UK inflation a lot stickier, and making the UK's inflation problem a lot worse than it should be.   So, while a lot of people are blaming the Bank of England for the mess the UK is in, we should also direct some of the blame at the energy price cap, a Labour Party idea that was hijacked by the Conservatives and is now acting as moron premium in the UK gilt market.   It is these sorts of poorly thought through political interventions that always have a tendency to come back and bite you in ways you don't expect, and the politicians are at it again, with the Lib Dems calling for a £3bn mortgage protection scheme, another crackpot idea that would push back in the opposite direction and simply make the task of getting inflation under control even more difficult.     On the plus side there are reasons to be optimistic, with the energy price cap set due to be reduced in July, while PPI inflation has also been falling sharply, with the monthly numbers in strongly negative territory, meaning it can only be a matter of time before the year-on-year numbers go the same way.     This trend of weaker PPI suggests that market forecasts of a terminal bank rate of 6% might be overly pessimistic, and that subsequent data will pull gilt yields lower, however we may have to wait another 2 to 3 months for this scenario to play out in the data.   This should still feed into headline CPI by the end of the year, though core prices might prove to be slightly more difficult to pull lower.      EUR/USD – remain on course for the April highs at 1.1095 while above the 50-day SMA at 1.0870/80 which should act as support. Below 1.0850 signals a move towards 1.0780.   GBP/USD – fell back to the 1.2680/90 area yesterday before recovering, having found resistance at the 1.2845/50 area at the end of last week. Still on course for a move towards the 1.3000 area, while above the 50-day SMA currently at 1.2510.    EUR/GBP – found support at the 0.8515/20 area and has move up towards the recent highs at 0.8620. A move through 0.8630 could see a move towards 0.8680. While below the 0.8620 area the bias remains for a return to the recent lows.   USD/JPY – currently finding itself rebuffed at the 142.50 area, which is 61.8% retracement of the 151.95/127.20 down move. Above 142.50 targets the 145.00 area. Support now comes in at 140.20/30.    FTSE100 is expected to open 45 points lower at 7,514   DAX is expected to open 82 points lower at 15,941   CAC40 is expected to open 34 points lower at 7,227   By Michael Hewson (Chief Market Analyst at CMC Markets UK)

Recession risks drive safe-haven flows gold’s way Oil has worst weekly decline since May Bitcoin tests highest level in a year   Oil Oil prices are declining on fears that a European recession and delayed stimulus from China will spell trouble for the global growth outlook.  Next week, the heads of the major central banks will gather in Portugal and likely signal a commitment to tackle inflation with aggressive rate hikes. Energy traders are worried that the Fed and friends might cripple economic growth in the second half of the year. The upcoming week contains Energy Institute global energy outlook that could become a lot more pessimistic and the World Economic Forum’s New Champions meeting, which will focus on energy transition.     NatGas There was a brief relief with European natural gas prices this week.  The current pullback could easily be disrupted as the supply situation remains very tight.  The risk of outages and increased demand could be triggered by a hot summer, which could send supplies much lower ahead of next heating season.be triggered by a hot summer, which could send supplies much lower ahead of next heating season.     Gold Gold has had a couple of rough months as Wall Street started to price in much more aggressive central bank tightening across Europe. The dollar has been rallying on strong demand for Treasuries as investors worry about the global growth outlook.  After tumbling to the $1920 level, gold is starting to attract safe-haven flows as the stock market selloff intensifies. Gold got an added boost after the Fed’s Bostic said he favors no more rate hikes for the rest of the year. The rebound however lost some steam after the latest PMI data isn’t showing enough weakness in the service sector to warrant a pause. Next week, will be key for Fed rate hike expectations as we get the PCE readings and hear from Fed Chair Powell again.  If swap futures start to believe the Fed will likely deliver two more rate increases, gold could remain vulnerable. However, if risk aversion runs wild, gold could see some flight to safety flows. Gold has key support at the $1900 level and resistance at the $1960 region.  

Inflation data should look a bit better by the autumn Whether or not the Bank ends up delivering the five extra rate hikes priced into markets heavily depends on whether the inflation numbers show some improvement over the summer. At the headline level they should, though mainly because a 20% cut in household energy bills this month will shave off roughly one percentage point from annual CPI. In theory, this matters little, but policymakers have put a lot of store in inflation expectations surveys over the past year or so, and the fall in electricity, gas and petrol prices has helped drive these down among consumers and businesses alike. Indeed the plunge in natural gas prices should start to show through in lower services inflation, albeit gradually. By November’s meeting, we think there will be sufficient evidence for the Bank to finally end its hiking cycle. Ultimately most – though not all – of the UK’s inflation drivers are shared with other developed market economies. Either way, Bank Rate close to 6% is very restrictive by historical standards. Higher loan-to-income multiples mean that mortgage repayments are now equivalent to roughly 35% of average disposable income. That’s a bigger share than when rates peaked ahead of the global financial crisis. Admittedly most mortgages are fixed for at least two years, which means most households are yet to encounter higher repayments. That means a recession isn’t inevitable, but we will see an ever-increasing drag on the UK consumer. The bigger risk in the short-term arguably comes from corporates (particularly small firms), which are typically on floating interest rates and are feeling the squeeze most acutely right now.  

The Commodities Feed: Brent breaks above $80 A below-consensus US CPI release has provided a boost to the commodities complex, with it weighing on the USD and leading to a rethink on how much more hiking there is to come from the Federal Reserve. For oil markets, attention will be on today’s IEA and OPEC monthly reports.   Energy: Urals trading above price cap The oil market continued its move higher yesterday, which saw ICE Brent not only break above US$80/bbl, but settle above this level. As a result, Brent has finally broken out of the range it has spent almost two months trading in. The key catalyst for the move was US CPI data coming in below consensus. And while the data is unlikely to change expectations for the Fed to hike at its next meeting, it does call into question the need for further tightening after the July meeting. While the fundamentals continue to support the view that oil prices should trend higher over the remainder of the year, there are still clear macro concerns in the market. In addition, in the very short term, the 200-day moving average is likely to provide some strong resistance to the market. According to Argus, Russian Urals are now trading slightly above the US$60/bbl G7 price cap for shipments from Black Sea ports. Western insurance and shipping services can only be used for Russian crude priced under the cap. Obviously, there is nothing stopping this crude oil from moving with the use of alternative ships and insurance. And the fact that Russia has managed to secure a large amount of non-western shipping capacity does make the price cap less effective. If Urals remain above the cap for a sustained period, it will be interesting to see if it eventually has any impact on Russian export volumes. The latest trade data from China this morning shows that crude oil imports averaged 12.67MMbbls/d over June, up 4% month-on-month and 45% higher year-on-year. Obviously imports were under pressure last year due to Covid related lockdowns. Meanwhile year-to-date crude imports are up 11.7% YoY. Yesterday’s EIA report saw some big inventory builds in crude and products. Commercial US crude oil inventories increased by 5.95MMbbls over the last week, which was quite a lot more than the 3MMbbls increase reported by the API the previous day. The crude build was largely driven by lower exports with crude oil exports falling by 1.76MMbbls/d week-on-week to 2.14MMbbls/d, which is the lowest weekly export number since January. On the product side, distillate fuel oil inventories increased by 4.82MMbbls, whilst there was little change in gasoline stocks. Meanwhile, refinery run rates increased by 2.6pp over the week to 93.7%. Overall, the report was on the bearish side, given the large builds and weaker implied demand. However, clearly the market was more focused on US CPI data yesterday. Both the IEA and OPEC will be releasing their monthly oil market reports today, which will include their latest outlook for the oil market. Despite broader macro concerns, last month the IEA remained constructive on the demand picture, with the agency forecasting oil demand to grow by 2.4MMbbls/d in 2023. However, the agency believes the macro picture will provide more headwinds for demand in 2024, with demand estimated to grow by 860Mbbls/d next year. European natural gas prices continue to come under pressure. TTF settled more than 8% lower yesterday and front month prices have traded down to their lowest levels in more than a month. Norwegian gas flows continue to edge higher from the lows seen in late May and over much of June (due to maintenance), whilst European storage is more than 80% full at the moment, well above the average of 65% for this time of year. Prices are likely to remain under pressure through the summer with storage expected to be full well ahead of the heating season. The Asian market is more profitable for LNG, with Asian spot LNG prices trading at its largest premium to TTF since January- more than US$3/MMBtu.

The Commodities Feed: Supply risks grow Russia’s bombing of port infrastructure along the Danube river in Ukraine has pushed grain prices significantly higher. This escalation risks spilling over into other parts of the commodities complex, particularly energy.   Energy – Oil marches higher Having struggled to break convincingly above US$80/bbl over the last week or so, Brent settled above US$82/bbl yesterday and in doing so broke above the 200-day moving average. The market would have taken comfort from China’s Politburo meeting where the government said it would provide further support to the property sector, stimulate consumption and tackle local government debt. China is key for global oil demand growth this year and the market has been getting increasingly concerned over the weaker-than-expected economic recovery, so any support measures will be helpful in easing some of these concerns. On the supply side, whilst remote for now, risks are growing following Russia’s escalation and bombing of Ukrainian port infrastructure along the Danube River. Whilst this is not a direct threat to energy markets, there are worries that this could spill over into other markets, particularly after Ukraine last week said that any ships heading to Russian Black Sea ports could be treated as potential military targets (in response to a similar statement from Russia). Russia ships almost 500Mbbls/d from the Black Sea port of Novorossiysk, while the CPC terminal in the port exports around 1.2MMbbls/d of Kazakh oil. Therefore, it is not too surprising that the market is starting to become a little nervous over a potential supply disruption, even if it is a remote risk for now.   In addition, stronger refinery margins are likely adding to some optimism over demand, although the strength in refinery margins appears to be more supply-driven than demand-driven at the moment. The strength has been driven predominantly by gasoline and middle distillate cracks, while fuel oil cracks are also holding relatively firm. European gasoline cracks have hit US$30/bbl, the highest levels since July last year. The strength in the gasoline market has been blamed on several factors, including tightness in the octane market, while hot weather in parts of Europe also appears to have led to some refinery disruptions. The initial strength in margins was driven by middle distillates, which would have led to some yield switching (gasoline to gasoil), however the more recent relative strength in gasoline could now see yields switching back (gasoil to gasoline). As a result, this is also offering continued support to middle distillate cracks. In addition, in the US, an unplanned outage at Exxon’s 540Mbbls/d Baton Rouge refinery, the fifth largest refinery in the US, is also providing some strength to margins. European natural gas prices also rallied significantly yesterday with TTF settling 8.5% higher on the day, taking it back above EUR30/MWh. There will be concerns over what further escalation in Ukraine could mean for the small but still important amount of Russian pipeline gas that runs through Ukraine into the EU. Fundamentally though, the European market remains in a very comfortable position with storge almost 84% full. While uncertainty may provide support to prices in the near term, we expect prices to come under pressure over much of the third quarter, given storage will be full well ahead of the next heating season (assuming no significant supply disruptions).  

US Everyone will be watching the US inflation report as a cool report could help support soft landing hopes and seal the deal for some that the Fed is done raising rates. Expectations for the July inflation report is for headline inflation to rise towards the mid-3% range, while core inflation remains steady and holding onto the lowest levels since 2021 on both a monthly basis at 0.2% and at 4.8% from a year ago.   Any hot surprises might bolster the case that the Fed may need to raise rates at the November meeting. Wall Street will pay close attention to Tuesday’s NFIB Small Business Optimism report and trade data. Thursday is all about the inflation report and the initial jobless claims. Friday contains the release of the PPI report and the preliminary University of Michigan Sentiment report/inflation expectations. Fed speak will also include appearances by Bostic and Bowman on Monday. Harker speaks on Tuesday and Bostic provides remarks on employment on Thursday. Earnings for the week include Alibaba Group Holding, Allianz, Bayer, Berkshire Hathaway, China Mobile, China Telecom, Eli Lilly, Honda Motor, Novo Nordisk, Palantir Technologies, Rivian Automotive, RWE, Saudi Arabian Oil, Siemens, SoftBank Group, United Parcel Service, and Walt Disney Eurozone Next week starts quickly on Monday with both Eurozone Investor Sentiment and German Industrial Production.  The August Sentix Eurozone sentiment reading should show confidence remains low in August, declining further from -22.5 to -25.0.   The June German industrial production data should show the manufacturing isn’t ready to rebound as expectations on a monthly basis are for a -0.5% drop, worse than the -0.2% prior reading. Weakening data points should support the view that inflation will slow significantly later this year. UK This week is all about growth and that is disappearing in the UK. Friday’s preliminary look at Q2 GDP is expected to show the economy is stagnating.  The consensus estimate for Q2 GDP is for a flat reading (consensus range of 0.0% to 0.1%), down from 0.1% in Q1.  The BOE is still likely to deliver more rate hikes, which should mean the UK economy is recession bound. Russia The CBR will have further pressure to keep on raising rates after a hot July inflation report.  Headline inflation in July is expected to jump from 3.25% to 4.25%, well above the 4% target.  At the end of the week, the release of the advance Q2 GDP reading is expected to show the economy rebounded from -1.8% to +3.3%. South Africa Next week mainly offers tier two and three economic data with both mining data and Manufacturing production results that are expected to show a modest rebound. Turkey A few economic indicators will be released this week, with the focus mainly on June Industrial Production, which should show activity turned negative. Switzerland Unemployment data on Monday is expected to show the labor market remains tight as the unemployment rate holds steady at 2.0%.  The focus remains on inflation for Switzerland and a strong labor market could keep wages strong and that should support the SNB case for a September hike. China Three key data to watch. On Tuesday, the Balance of Trade for July, another horrendous print is being forecasted for exports growth to plunge further to -14% year-on-year from -12.4% recorded in June If it turns out as expected, it will be the third consecutive month of contraction. Imports growth is forecasted to improve slightly to -5.2% year-on-year from -6.8% in June but still a potential fifth consecutive month of contraction. Overall, such forecasts are pointing to a continuation of weak internal and external demand that market participants are getting fatigued from China’s top policymakers’ ongoing stimulus rhetoric that is too vague and too minor in the past two months in order to boost domestic consumption and the languish property sector. Consumer inflation and producer prices data will be out on Wednesday. Higher odds of deflationary risk as the forecast is calling a negative reading on inflation at -0.3% year-on-year from 0% printed in June. Producer prices are forecasted to contract again to -5% year-on-year from -5.4% in June, a potential ten consecutive months of negative growth. On Friday, we will have outstanding loan growth and M2 money supply data for July. On the earnings front, Alibaba, one of China’s Big Tech will report its June quarter 2023 earnings results on Thursday, 10 August. Noteworthy to scrutinise Alibaba’s earnings and forward guidance as China policymakers have loosened their grip on the business operations of China’s Big Tech firms. India The key highlight will be RBI’s interest rate decision on Thursday where the consensus is expecting RBI to stand pat at 6.5%, a potential third consecutive of no change on the policy rate due to easing inflationary pressures. On Friday, industrial production for June will be out, and a drop in growth is being forecasted at 4.1% year-on-year from 5.7% in May, still a potential eight consecutive month of expansion. Australia A light data week ahead, Westpac consumer confidence for August out on Tuesday where a dip of -0.7% month-on-month is being forecasted from 2.7% printed in July. Lastly, consumer inflation expectations for August will be released on Thursday.     New Zealand Two data to take note of: electronic retail card spending for July out on Wednesday, and manufacturing PMI for July on Friday. Japan The Bank of Japan (BoJ) Summary of Opinions will be out on Monday and market participants will be scrutinising any hints on the next step in monetary policy normalisation in terms of timing and form as BoJ has indirectly revised upward on the upper limit of its Yield Curve Control (YCC) on the 10-year JGB yield to 1% during its last meeting in July. On Tuesday, we will have household spending for June where the consensus is expecting a slight contraction to -4.1% year-on-year from 4% in May but on a month-month basis, a recovery is expected at 0.3% in June from -1.1% printed in May. Bank lending data for July will be released as well on the same day. Singapore The only key data will be the Q2 GDP finalised reading out on Friday where the prior flash figures brushed away a recession scare as Q2 q/q and y/y came in positive at 0.3% and 0.7% respectively. Markets Energy Oil prices have remained supported by OPEC+, as they appear committed to keeping this market tight.  The upcoming week should have some of the focus shift back to demand.  On Monday, Saudi Aramco will post their earnings results.  Tuesday has two events, with the release of some key Chinese trade data, which includes oil imports and the US EIA Short-term Energy Outlook (STEO).  On Thursday, OPEC publishes their monthly report, while the EIA releases their monthly publication on Friday. Natural gas prices have also steadied in the US over cooler weather, while Europe continues to deal with a tight market over Norwegian outages. Gold After the Treasury’s quarterly refunding announcement, concerns grew over the US widening deficit.  Gold pared weekly losses as the bond market selloff saw some relief after the NFP report showed the labor market is softening. The focus next week will be all about US inflation and some major data out of China. Soft landing hopes remain, but that could get rattled if the disinflation process stalls. Crypto Bitcoin continues to consolidate below $29,000 as volatility struggles to return.  Bitcoin was little changed after both the Treasury quarterly refunding announcement and NFP report. Regulatory decisions and ETF rulings still remain the likely catalysts to trigger a meaningful crypto move.  

The Commodities Feed: LNG supply risks linger Natural gas prices are likely to remain volatile in the coming days, at least until there is some clarity surrounding potential strike action at a number of Australian liquefied natural gas (LNG) facilities.   Energy – OPEC sees deficit over remainder of 2023 Oil prices came under some pressure yesterday with ICE Brent settling a little more than 1.3% lower on the day. This is despite OPEC releasing its monthly oil market report which suggests that the market will continue to tighten for the remainder of the year. OPEC made little in the way of changes to its global oil demand forecasts for the rest of this year and for 2024. However, the group did revise higher its 2023 non-OPEC supply estimates by a little more than 100Mbbls/d on the back of upward revisions to Russian supply. OPEC numbers suggest that demand for OPEC oil over the third quarter will be 29.56MMbbls/d, which is well above the 27.31MMbbls/d that OPEC produced in July. The call on OPEC output grows to 30.74MMbbls/d in the fourth quarter, whilst over 2024, the group’s numbers suggest demand of 30.08MMbbls/d for OPEC oil. Given the current production targets of OPEC+ until 2024, these numbers suggest global oil inventories will draw for the remainder of this year and over 2024. The International Energy Agency (IEA) will publish its latest monthly oil market report later today, where it will share its latest outlook for the market.   The significant cuts that we are currently seeing from OPEC+ continue to be supportive for medium sour crudes. The Brent-Dubai spread remains in negative territory and in fact has traded to a discount of more than US$1.20/bbl – lower than the levels seen during 2020, when OPEC+ made significant cuts. The weakness in Brent relative to Dubai should mean that Atlantic Basin crudes should be more appealing to Asian buyers. It is difficult to see any significant reversal in the spread before Saudi Arabia starts unwinding its additional voluntary supply cuts. Having rallied significantly earlier in the week, following supply risks around Australian LNG, the European gas market gave back some of these gains yesterday, with TTF settling more than 6.6% lower on the day. The European gas market remains in a comfortable situation with storage more than 88% full and it is clear that the region will hit its target of 90% by 1 November, well ahead of schedule. However, the market will still need to keep a close eye on how labour negotiations progress in Australia. The potential for prolonged industrial action at a number of Australian LNG facilities could put a little over 10% of global LNG supply at risk, and given Europe’s growing reliance on LNG, this would (as already seen in recent days) have an impact on European gas prices as Asian buyers compete more aggressively for alternative supply.

The Commodities Feed: China macro concerns grow Weak Chinese data yesterday weighed heavily on the commodities complex. However, there was an exception: European and Asian natural gas prices rallied on continued uncertainty over Australian LNG supply.   Energy: Natural gas spikes higher once again The effects of weaker-than-expected Chinese macro data rippled through the commodities complex yesterday, including oil. ICE Brent settled more than 1.5% lower on the day with worries over what this weak data means for the Chinese economy and oil demand. In addition, much stronger-than-expected US retail sales likely led to some questions over whether the US Federal Reserve may still have a bit more to do when it comes to policy tightening.   API data released overnight was more constructive, with US crude oil inventories falling by 6.2MMbbls over the last week, quite a bit more than the roughly 2.5MMbbls draw the market was expecting. In addition, Cushing crude oil inventories fell by 1.03MMbbls, whilst for products, gasoline stocks declined by 761Mbbls and distillate inventories increased by 658Mbbls. The more widely followed EIA weekly report will be released later today. Natural gas prices continue to trade in a volatile manner. TTF settled more than 12% higher yesterday with growing concerns over the risk to Australian LNG. There was no breakthrough in talks yesterday to avoid strike action and so clearly the risk of supply disruptions is growing. We should get more clarity on the situation towards the end of the week. However, the European market is in a very good position. European storage is basically 90% full now, hitting the European Commission’s goal about two and a half months before the target date. It is looking as though European storage will essentially be full before the start of the next heating season and so we would expect to see renewed downward pressure on prices, particularly once there is some clarity around Australia.  

Energy The oil price rally that has been in place since June has ended.  Energy traders will focus on the latest problems from China, the global flash PMIs, the Jackson Hole Symposium, and the BRICS summit.  After having an interrupted rally from $68 to $84, WTI crude looks poised to consolidate around the $80 region as traders grapple with a tight market that is facing headwinds from world’s two largest economies.  Following the Jackson Hole gathering, it will be clear if the bond market selloff continues or cools down.  If the global economic outlook become even more pessimistic, oil might give up a good portion of the recent rally. Natural gas prices remain fixated over strike action at an LNG facility in Australia. Fresh talks between Woodside Energy and union officials are expected to begin on August 23rd.  Natural gas will remain volatile until we have a handle on how gas availability will be for the winter.   Gold Gold traders will closely watch the annual Jackson Hole Symposium and how aggressive China becomes with providing support to the deepening property crisis. The global bond market selloff has sent gold prices sharply lower over the past month but that could stabilize if we get a dovish Fed Chair Powell and as long as China doesn’t disappoint with the next wave of stimulus. Spot gold has fallen below the $1900 level, but momentum selling has slowed. Gold traders are also fixating over the $1900 level for gold futures. Currently, gold futures are only $45 away from their March lows, while spot gold is around $80 away. For gold selling pressure to remain, global bond yields might need to surge higher.    

Energy The oil price rally that has been in place since June has ended.  Energy traders will focus on the latest problems from China, the global flash PMIs, the Jackson Hole Symposium, and the BRICS summit.  After having an interrupted rally from $68 to $84, WTI crude looks poised to consolidate around the $80 region as traders grapple with a tight market that is facing headwinds from world’s two largest economies.  Following the Jackson Hole gathering, it will be clear if the bond market selloff continues or cools down.  If the global economic outlook become even more pessimistic, oil might give up a good portion of the recent rally. Natural gas prices remain fixated over strike action at an LNG facility in Australia. Fresh talks between Woodside Energy and union officials are expected to begin on August 23rd.  Natural gas will remain volatile until we have a handle on how gas availability will be for the winter.   Gold Gold traders will closely watch the annual Jackson Hole Symposium and how aggressive China becomes with providing support to the deepening property crisis. The global bond market selloff has sent gold prices sharply lower over the past month but that could stabilize if we get a dovish Fed Chair Powell and as long as China doesn’t disappoint with the next wave of stimulus. Spot gold has fallen below the $1900 level, but momentum selling has slowed. Gold traders are also fixating over the $1900 level for gold futures. Currently, gold futures are only $45 away from their March lows, while spot gold is around $80 away. For gold selling pressure to remain, global bond yields might need to surge higher.    

The Commodities Feed: Australian LNG strike risks ease We are likely to see further downward pressure in natural gas prices today with Woodside and unions reaching an in-principal agreement. This means that strike action may be avoided at the North West Shelf. Unions will meet today to discuss Woodside’s ‘strong’ offer.   Energy - Unions reach in-principle agreement European natural gas prices came under pressure yesterday. TTF prices settled more than 14% lower on the day as the market awaited news on the outcome of talks between Woodside and unions. This morning, both Woodside and unions have said that they have reached an in-principle agreement. The Offshore Alliance will meet today in order to discuss Woodside’s offer, an offer which they have said is ‘strong'. Obviously, we will need to see what the unions finally decide at their meeting today, but all indications at the moment look promising that strike action at the North West Shelf will be avoided. This suggests that we could see a further sell-off in European gas and Asian LNG prices today. However, even if a deal is made with Woodside, talks with Chevron are still ongoing, where there is 24.5mtpa of capacity at risk. The oil market saw some further weakness yesterday. There has been increased noise in recent days about possible supply increases from Iran and Iraq. We can now also add Venezuela to the list, with reports that the US administration is in talks with Venezuela about easing sanctions in return for fairer elections next year. EIA data released yesterday show that US commercial crude oil inventories fell by 6.13MMbbls last week, to leave total crude oil inventories at less than 434MMbbls - the lowest level this year. Crude oil stocks at Cushing also fell by 3.13MMbbls over the week. Meanwhile, refined product numbers were less constructive with gasoline and distillate inventories increasing by 1.47MMbbls and 945Mbbls respectively. Total product supplied (implied demand) was also weaker over the period, falling 498Mbbls/d WoW.

Oil prices have strengthened over the summer as fundamentals tighten, whilst natural gas prices have been volatile, with potential strike action in Australia leading to LNG supply uncertainty. Chinese concerns are weighing on metals, but grain markets appear more relaxed despite the collapse of the Black Sea deal.   Oil market tightness to persist Oil prices have strengthened over the summer, with ICE Brent convincingly breaking above US$80/bbl. The strength in the flat price has coincided with strength in time spreads, reflecting a tightening in the physical oil market. OPEC+ cuts, and in particular additional voluntary cuts from Saudi Arabia, mean that the market is drawing down inventories. We expect this trend will continue until the end of the year, which suggests that oil prices still have room to move higher from current levels. While the fundamentals are constructive, there are clear headwinds for the oil market. Firstly, it is becoming more apparent that the Fed will likely keep interest rates higher for longer and that, along with renewed USD strength, is a concern for markets. Secondly, Chinese macro data continues to disappoint, raising concerns over the outlook for the Chinese economy and what this ultimately means for oil demand. That said, up to now, Chinese demand indicators remain pretty strong. We expect the tight oil environment to persist through much of 2024 with limited non-OPEC supply growth, continued OPEC+ cuts and demand growth all ensuring that global inventories will decline. However, we could see some price weakness in early 2024, with the market forecast to be in a small surplus in the first quarter of next year before moving back into deficit for the remainder of 2024, which should keep prices well supported. The risks to our constructive view on the market (other than China demand concerns) include further growth in Iranian supply despite ongoing US sanctions and a possible easing in US sanctions against Venezuela, which could lead to some marginal increases in oil supply.  

Remember that 'back to school' feeling at the end of summer? A tedious car journey home after holiday fun, knowing you'll be picking up where you left off? I'm afraid we've got a very similar feeling about the global economy right now. 'Are we nearly there yet?'. No. Very few reasons to be cheerful Lana del Rey's Summertime Sadness classic comes to mind as we gear up for autumn. And I'm not just talking about chaotic weather or even, in my case, disappointing macro data. Most of us have had the chance to recharge and rethink over the past couple of months. and I'm afraid all that R&R has done little to brighten our mood as to where the world's economy is right now. Sure, the US economy has been holding up better than we thought. And yes, the eurozone economy grew again in the second quarter. Gradually retreating headline inflation should at least lower the burden on disposable incomes. And let's be thankful for the build-up of national gas reserves in Europe, which should allow us to avoid an energy supply crisis this winter unless things turn truly arctic. But that's about as upbeat as I can get. We still predict very subdued growth to recessions in many economies for the second half of the year and the start of 2024. The stuttering of the Chinese economy seems to be more than only a temporary blip; it seems to be transitioning towards a weaker growth path as the real estate sector, high debt and the ‘de-risking’ strategy of the EU and the US all continue to weigh on the country's growth outlook. In the US, the big question is whether the economy is resilient enough to absorb yet another potential risk factor. After spring's banking turmoil, the debt ceiling excitement, and more generally, the impact of higher Fed rates, the next big thing is the resumption of student loan repayments, starting in September. Together with the delayed impact of all the other drag factors, these repayments should finally push the US economy into recession at the start of next year. And then there's Europe. Despite the weather turmoil, the summer holiday season seems to have been the last hurrah for services and domestic demand in the eurozone. Judging from the latest disappointing confidence indicators, the bloc's economy looks set to fall back into anaemic growth once again   Little late summer warmth This downbeat growth story does have an upbeat consequence; inflationary pressure should ease further. It's probably not going to be enough to bring inflation rates back to central banks’ targets, but they should be low enough to see the peak in policy rate hikes. Central bankers would be crazy to call an end to those hikes officially; they don't want to add to speculation about when the first cuts might come, thereby pushing the yield further into inversion. And there's also the credibility issue - you never know, prices might start to accelerate again. So, expect major central bankers to remain hawkish at least until the end of the year. In our base case, we have no further rate hikes from the US Federal Reserve and one final rate rise by the European Central Bank.   However, in both cases, these are very close calls, and the next central bank meetings are truly data-dependent. Sometimes, a Golden Fall or Indian Summer can make up for any summertime sadness. But it doesn’t look as if the global economy will be basking in any sort of warmth in the coming weeks. The bells are indeed ringing loud and clear. Vacation's over; school is here. And while I'm certainly too old for such lessons, I'm taken back to that gloomy, somewhat anxious feeling I had as a kid as summer wanes and the hard work must begin once again.   Our key calls this month: • United States: The US confounded 2023 recession expectations, but with loan delinquencies on the rise, savings being exhausted, credit access curtailed and student loan repayments restarting, financial stress will increase. We continue to forecast the Federal Reserve will not carry through with the final threatened interest rate rise. • Eurozone: The third quarter may still be saved by tourism in the eurozone, but the latest data points to a more pronounced slowdown in the coming months. Inflation is falling, but a last interest rate hike in September is not yet off the table. The European Central Bank will be hesitant to loosen significantly in 2024. • China: The latest activity data has worsened across nearly every component. Markets have given up looking for fiscal stimulus, and have started making comparisons with 1990s Japan. We don’t agree with the Japanification hypothesis, but clearly a substantial adjustment is underway, and we have trimmed our growth forecasts accordingly. • United Kingdom: Uncomfortably high inflation and wage growth should seal the deal on a September rate hike from the Bank of England. But emerging economic weakness suggests the top of the tightening cycle is near, and our base case is a pause in November. • Central and Eastern Europe (CEE): Economic activity in the first half of the year has been disappointing, leading us to expect a gloomier full-year outlook. Despite this, we see a divergence in economic policy responses, driven by countryspecific challenges. • Commodities: Oil prices have strengthened over the summer as fundamentals tighten, whilst natural gas prices have been volatile, with potential strike action in Australia leading to LNG supply uncertainty. Chinese concerns are weighing on metals, but grain markets appear more relaxed despite the collapse of the Black Sea deal. • Market rates: The path of least resistance is for longer tenor rates to remain under upward pressure in the US and the eurozone and for curves to remain under disinversion (steepening) pressure. We remain bearish on bonds and anticipate further upward pressure on market rates from a tactical view. • FX: Stubborn resilience in US activity data and risk-off waves from China have translated into a strengthening of the dollar over the summer. We still think this won’t last much longer and see Fed cuts from early 2024 paving the way for EUR:USD real rate convergence. Admittedly, downside risks to our EUR/USD bullish view have grown.     Inflation has only been falling for a matter of months across major economies, but the debate surrounding a possible “second wave” is well underway. Social media is littered with charts like the ones below, overlaying the recent inflation wave against the experience of the 1970s. These charts are largely nonsense; the past is not a perfect gauge for the future, especially given the second 1970s wave can be traced back to another huge oil crisis. But central bankers have made no secret that nightmares of that period are shaping today's policy decisions. Policymakers are telling us they plan to keep rates at these elevated levels for quite some time.

The Commodities Feed: Oil cuts and LNG supply risks The oil market continues to move closer to US$$90/bbl. A possible rolling over of Saudi cuts could see it finally break this level. Gas markets will get some more clarity this week on Australian LNG with workers at 2 facilities set to go on strike as soon as this Thursday if unions and Chevron fail to come to a deal.   Energy - Saudi oil cuts The oil market had a strong week last week with ICE Brent managing to settle 4.82% higher, which also saw the market almost hit US$89/bbl and trading to its highest level since January. Support would have come from growing expectations that the Fed could be done with its hiking cycle. In addition, fundamentals remain constructive with the oil market set to continue to tighten for the remainder of the year. This tightening is largely due to OPEC+ supply cuts. However, whilst OPEC continues to cut, there are some producers within the group who continue to see output edge higher (Iran, Libya and Venezuela - these members are exempt from current supply cuts). Preliminary OPEC production data for August is starting to come through and the Bloomberg survey shows that the group increased output by 40Mbbls/d MoM to 27.82MMbbls/d. While Saudi output is estimated to have fallen by 130Mbbls/d to 8.98MMbbls/d, this was offset by increases from Iran and Nigeria. Iranian output is estimated to have increased by 90Mbbls/d to 3.07MMbbls/d. Nigerian output increased by 80Mbbls/d to 1.34MMbbls/d. This week the oil market will be focused on what Saudi Arabia decides to do with its additional voluntary cut of 1MMbbls/d. The Saudis will need to decide whether to roll this cut into October, let it expire at the end of September or gradually ease the cut from next month. We believe that the Saudis will likely roll over the cut into October, as they will not want to put any renewed downward pressure on the oil market, although fundamentally, the market should be able to absorb the return of these barrels, given the large deficit forecast for the rest of the year. The latest positioning data shows that speculators reduced their net long in ICE Brent by 15,544 lots over the last reporting week, leaving them with a net long of 202,227 lots as of last Tuesday. However, given the move in the market since then, along with the increase in open interest, the actual speculative net long has likely increased. Natural gas prices also remain fairly well supported with a combination of continued supply risks around Australian LNG as well as reduced Norwegian gas flows due to ongoing maintenance at fields. Strike action at the Gorgon and Wheatstone LNG facilities in Australia could start as soon as this Thursday if unions and Chevron do not come to an agreement.  

The Commodities Feed: LNG strike action delayed The oil market has shrugged off the weakness seen in equity markets with strong fundamentals continuing to support prices. Meanwhile, European gas prices came under pressure yesterday with delayed strike action at Australian LNG facilities raising hopes that parties could come to a deal.   Energy - Saudis increase prices into most regions Sentiment in the oil market remains constructive after Saudi Arabia and Russia decided to extend their voluntary supply cuts by three months. ICE Brent managed to edge higher yesterday, settling at US$90.60/bbl, whilst the Brent Dec’23/Dec’24 spread continues to surge, settling at a backwardation of US$7.28/bbl, up from less than US$4/bbl in late August. The strength in time spreads is clearly indicating tightness in the oil market. Our balance sheet shows that the market remains in deep deficit through until year-end, before moving back into a small surplus in 1Q24. While this surplus may lead to some price weakness early next year, we believe that it will be short-lived with the market set to return to deficit over the latter part of 2024.   Following the extension of Saudi cuts and the tightness in the market, it was no surprise that Saudi Arabia increased its official selling prices (OSP) for most grades of its crude into most regions. The flagship Arab Light into Asia saw its OSP raised by US$0.10/bbl MoM to US$3.60/bbl over the benchmark for October - the highest level seen so far this year. All other grades into Asia also saw increases, while similar action was taken for grades into the US and Med. Europe was the only region which saw some relief, with OSP’s for all grades cut. API data released overnight was constructive, showing that US crude oil inventories fell by 5.5MMbbls, This is larger than the roughly 2MMbbls draw the market was expecting. In addition, crude oil inventories at the WTI delivery hub, Cushing, declined by 1.35MMbbls. On the product side, gasoline stocks fell by 5.1MMbbls, while distillate stocks increased by 300Mbbls. The increase in distillate stocks was marginal but will help ease some concern over low middle-distillate inventories as we head into the northern hemisphere winter. The more widely followed EIA inventory report will be released later today.   Natural gas prices came under significant pressure yesterday with TTF falling by almost 10%. This is after growing optimism that strike action at two of Chevron’s LNG facilities in Australia may be avoided. Partial strike action was meant to start at Gorgon and Wheatstone today. However, this has been delayed until tomorrow as the company and unions continue to work towards a deal. The two facilities make up around 6% of global LNG supply so the market continues to watch these developments closely. The European market will also have to deal with lower Norwegian gas flows for a little bit longer than originally anticipated. Field maintenance at several fields, including Troll has been extended by a couple of days. Total Norwegian flows are around 137mcm/day, compared to more than 300mcm/day in mid-August.

The Commodities Feed: European gas rallies European natural gas prices saw significant strength yesterday as we move closer towards the official start of the heating season, whilst there have also been further disruptions to Norwegian gas flows.   Energy – European gas rallies European natural gas prices saw further strength yesterday with TTF rallying by 11.69% to settle at a little over EUR44/MWh, its highest level since April. Further disruptions to Norwegian supply appear to have provided a boost, with the Troll field seeing a delayed startup after a compressor test. The outage is affecting about 25mcm/day of capacity. This is happening at a time when there is also a planned outage at the Skarv field, impacting a little over 22mcm/day of capacity. However, fundamentals in the short term remain comfortable, with European gas storage 95% full as we head closer to the start of the new gas year, which officially gets underway on 1 October.

According to the latest CFTC report, the past week was relatively calm in the futures market. One notable change was the value of the net short yen by position, which corrected by 1.2 billion, while changes in other currencies were minimal. The US dollar's net positioning, after sharply rising the previous week, saw a 0.3 billion correction, bringing it to 8.5 billion, indicating a firm speculative positioning for the dollar. Other factors that supported the greenback are the drop in the number of long positions in oil and especially gold, with a weekly change of -4.8 billion, implying further declines. This often signifies growing bullish sentiment for the US dollar.   The University of Michigan's Consumer Sentiment Index fell to 63.0 in October, the reading was below the forecast of 67.2, reaching the lowest level since May. This marks the third consecutive decline and can be largely attributed to rising gas prices and a decline in the stock market. However, consumer spending remains at a good level despite weaker sentiment in recent months. China's consumer price index remained flat from a year earlier in September, while the Producer Price Index fell by 2.5% as concerns linger about weak demand. Both figures were slightly below consensus estimates. This week's data on industrial production, retail sales, and third-quarter GDP will provide a clearer picture of the impact of the government's additional stimulus measures. The conflict between Israel and Hamas has quickly escalated into the bloodiest clash in the past 50 years from both sides. As both Israel and Iran are minor natural gas exporters, European natural gas prices rose by about 40% last week. Oil markets remain calmer due to reduced demand and excess production capacity. US consumer price inflation for September shows headline prices rose 0.4% month-on-month (consensus 0.3%), and the core index slowed down from 4.3% year-on-year to 4.1% year-on-year, which is a positive sign for the Federal Reserve. There is growing confidence that the Fed's rate hike cycle is coming to an end.   The British pound corrected slightly above the resistance level at 1.2305 and then resumed its decline. It is assumed that the local peak has been formed, and the sell-off will continue, with the nearest target being 1.2033 (the low from October 4). In case it breaks below this level, selling pressure may intensify, with the long-term target being 1.1740/90.  

Big week for central banks as China falls into deflation By Michael Hewson (Chief Market Analyst at CMC Markets UK)   Markets in Europe finished higher again last week with the DAX up for the 6th week in a row, while the FTSE100 returned to levels last seen on the 19th October, after the latest US jobs report came in better than expected, and unemployment unexpectedly fell to 3.7%.   US markets also finished the week strongly with the S&P500 pushing above its summer highs to close at its highest level this year, with the Nasdaq 100 not too far behind, with the tech sector, once again instrumental in achieving the bulk of this year's outperformance.   The catalyst for the strong finish was a solid US jobs report which showed 199k jobs were added in November, while the unemployment rate slipped to 3.7%. With the participation rate returning to 62.8% and wages remaining at 4%, the idea that the Federal Reserve will be compelled to cut rates aggressively underwent a bit of a setback with yields moving sharply higher, as 2024 rate cut expectations got pared back.   The apparent resilience of the US economy against a backdrop of a sharp fall in inflation expectations from the latest University of Michigan confidence survey has helped craft a narrative that despite the sharp rise in interest rates delivered over the past 18 months, the US economy will be able to avoid a severe recession.   This scenario does present some problems for the Federal Reserve when it comes to managing market expectations of when rate cuts are likely to come, with the recent sharp fall in yields globally speaking to a widespread expectation that rates may well be cut sharply as we head into 2024.   As far as the US economy is concerned aggressive rate cuts at this stage look a little less likely than they do elsewhere where we've seen sharp CPI slowdowns in the pace of inflationary pressure. Earlier this month the latest EU inflation numbers showed headline CPI slow to 2.4% in November, while German CPI was confirmed at 2.3% as month-on-month prices declined by 0.7%, the second month in a row, CPI went negative.   Germany isn't unique in this either given that PPI inflation had already given plenty of indication of the direction of travel when it came to price deflation.   In China over the weekend headline CPI also went negative in November, only in this case it was on the annualised number to the tune of -0.5%, for the second month in a row and for the 3rd month in the last 5. PPI inflation also remained in negative territory to the tune of -3%, the 14th month in succession as the world's 2nd biggest economy grapples with deflation, and slowing domestic demand.   This deflationary impulse appears to be already making itself felt in Europe, and truth be told has been doing so for some time, the only surprise being how blind to it certain parts of the European Central Bank have been to it.   These concerns over deflation while slowly starting to be acknowledged don't appear to be being taken seriously at the moment, although in a welcome shift we did hear Germany ECB governing council member Isabel Schabel admit that they had been surprised at how quickly prices had slowed over the past few months, even as economic activity stumbled sharply.     Consequently, this week's central bank meetings of the Federal Reserve, European Central Bank and the Bank of England are likely to be crucial in managing expectations when it comes to the timing and pace of when markets can expect to see rate cuts begin now, we know the peak is in.   Of all the central banks the Fed probably has the easiest job in that they have more time to assess how the US economy is reacting to the tightening seen over the past few months.   The ECB has no such luxury given that the two biggest economies of Germany and France could well be in recession already, and where prices could slide further as we head into 2024.   The fear for central banks is that a lot of the slowdown in inflation has been driven by the recent slumps in crude oil and natural gas prices and could well be transitory in nature, and with wage inflation still elevated will be reluctant to signal the "all clear" too soon.   The Bank of England has a similar problem although the UK economy isn't showing the same levels of weakness as those of France and Germany, and furthermore inflation in the UK is almost double that of Europe, with wage costs and services inflation even higher.   As we look towards a new trading week, and probably the most consequential one this month, European markets look set to open slightly higher as investors look back at the inflation numbers from the weekend and extrapolate that 2024 may well be the year that rates start to come down, with the main risk being in overestimating by how far they fall.      EUR/USD – slid down towards the 200-day SMA on Friday, stopping just short at 1.0724, with a break below 1.0700 targeting the prospect of further losses toward the November lows at 1.0520. We need to see a move back through 1.0830 to stabilise.   GBP/USD – slid to the 1.2500 area but remains above the 200-day SMA for now, with only a break below 1.2460 signalling a broader test of the 1.2350 area. Resistance currently at 1.2620 area.    EUR/GBP – still range trading between the 0.8590 area and the lows last week at 0.8550. While below the 0.8615/20 area the risk remains for a move towards the September lows at 0.8520, and potentially further towards the August lows at 0.8490. USD/JPY – finding a level of support at the 200-day SMA at 142.50 after last week's steep fall. We need to see a daily close below the 200-day SMA to open a test of 140.00 and then on towards 135.00. Resistance back at 146.20.   FTSE100 is expected to open 7 points higher at 7,561   DAX is expected to open 25 points higher at 16,784   CAC40 is expected to open 11 points higher at 7,537

What next for UK oil and gas after a year of lower profits  By Michael Hewson (Chief Market Analyst at CMC Markets UK) In contrast to the strong gains seen in 2022 the oil and gas sector has had a much more mixed year as a sharp fall in natural gas prices, and a slowdown in oil prices saw profits return to more normal levels for the sector. In 2022 the likes of Exxon Mobil and Shell saw share price gains in excess of 60%, as both oil giants reaped the benefits of higher margins as they bounced back from the huge losses posted during the Covid pandemic. As a whole the sector posted losses of $76bn with around $70bn of that amount as a result of write-downs and impairments on unviable or stranded assets. As with last year the challenge for the likes of Exxon Mobil, BP and Royal Dutch Shell remains in how they transition towards a renewable future without hammering their margins, and while we've seen a period of share price consolidation this year, we've also seen a shift in tone away from keeping the green lobby happy. There now seems to be a more hard-nosed and pragmatic approach, which has helped both Exxon and Shell's share price make new record highs over the second half of the year, although as oil and gas prices have declined so have share prices.   Consolidation year for BP and Shell As a whole the sector saw demand and prices collapse during that Covid period and it would appear that those experiences during that time may have shaped OPEC's response to this year's supply and demand concerns. Fearing another oversupply issue OPEC and Russia have kept much tighter control over production output, announcing cuts in April and then continuing those caps through the summer and into next year in an attempt to keep a floor under prices.   Along with further geopolitical uncertainty on top of Russia's war in Ukraine, in October we also had to contend with the Hamas savage attack on Israel's northern border, and Israel's response which prompted concerns over transit routes around the Gulf region.   With inflationary pressures subsiding and energy prices stabilising at lower levels the oil and gas sector for now appears to focussing on what it does best in generating cash, with new CEOs for both Shell and BP marking a potential shift in thinking when it comes to renewables. Under their previous incumbents, Shell's Ben Van Buerden and BP's Patrick Looney the focus was very much on transitioning away from oil and gas and towards a much lower margin future of renewable energy.    While a laudable goal it soon became apparent that while the politics was very much geared to that, there was a growing realisation that it couldn't be done cheaply and not without enormous damage to the energy and economic security of everybody. When Wael Sarwan took over as CEO of Shell he recognised this reality quickly, pushing back against the prevailing narrative and outright hysteria of politicians and activists that it could be done cheaply and easily.   In June he pushed back by saying that "We need to continue to create profitable business models that can be scaled at pace to truly impact the decarbonisation of the global energy system. We will invest in the models that work – those with the highest returns that play to our strengths" in a broadside at some of the recent reckless narrative and almost hysterical calls to cut back on fossil fuel use whatever the cost. While this has caused some unease in some parts of the Shell business it appears to be an acknowledgment of the reality that the transition to renewables will be a gradual process especially given the current levels of geopolitical uncertainty that are serving to drive the costs of the energy transition ever higher.   It is a little worrying that politicians have been unable to grasp this reality, continuing to push the myth that wind power is cheap, as the silent majority push back over the reality that the transition will be ruinously expensive if done too quickly.   When Shell reported its Q2 numbers in July profits fell short of expectations due to the sharp falls in both natural gas and crude oil prices that occurred over that quarter. The rally in oil and gas prices since then has ensured that this didn't happen in Q3 with profits coming in line with forecasts, which given that all its peers saw their numbers come in light was particularly notable.   Q3 profits came in at $6.22bn, in line with expectations helped by improvements in refining margins as well as higher oil and gas prices and a better performance in its trading division. The integrated gas part of the business saw profits remain steady and were in line with Q2 at $2.5bn.   Upstream saw a solid improvement on Q2's $1.68bn, rising to $2.22bn, although we've still seen a steep fall from the same quarter last year. On renewables we saw that part of the business sink to a loss of -$67m, due to lower margins and seasonal impacts in Europe, as well as higher operating expenses. Shell's chemicals and products division also did much better in Q3, its profits rising to $1.38bn helped by an improvement in refining margins due to lower global product supply as well as higher margins in trading and optimisation, although chemicals were still a drag on profitability overall.   On the outlook Shell nudged the upper end of expectations for capital expenditure down by $1bn to between $23bn to $25bn, as well as increasing the buyback to $3.5bn. While Shell's share price has held up reasonably well the same can't be said for BP which while holding onto last year's gains has lagged behind Shell, although BP was able to get close to its February highs in the middle of October.  

Four scenarios for the Bank of England's February meeting Expect the BoE to drop the pretence that it could hike rates again but to continue signalling rates will stay restrictive for an "extended period". With services inflation and wage growth to remain sticky in the near term, we think August is the most likely starting point for rate cuts.   Four scenarios for the Bank of England meeting   The BoE seems more reticent than other central banks to endorse rate cuts Both the Federal Reserve and European Central Bank have hinted, with varying degrees of caveats, that rate cuts are on the cards this year. So far, the Bank of England hasn’t followed suit. It was careful not to say anything at the December meeting that could be misconstrued as an endorsement of market pricing on cuts. And there has essentially been radio silence from committee members since then. We suspect the Bank will still want to tread carefully as it gears up for the first meeting of 2024. But the reality is that defending a “higher for longer” stance on interest rates is getting harder as the inflation backdrop shows signs of improving. Remember that the BoE has pinned the chances of rate cuts on three variables. One is the strength of the jobs market, but data here is suffering from well-known reliability problems. So, in practice, it comes down to services inflation and private-sector wage growth. Both are tracking well below the November BoE projections. Services CPI is currently 6.4%, and despite that coming as an upside surprise to consensus when it was released, it’s still half a percentage point below the BoE’s projection. Private wage growth is 6.5%, but remember this is a three-month average and the latest two ‘single month’ readings are around 6%. When we get the data in a couple of weeks, this variable is likely to have ended the year a full percentage point below the BoE’s most recent forecast (7.2%). Add in the fact that natural gas prices are noticeably lower across the futures curve, and we should see sizeable downward revisions to the Bank’s inflation forecasts for this year. But what happens to the forecasts beyond 2024 is less clear-cut.   Financial markets expect roughly four UK rate cuts this year