October in European Gas

If September was boring in European Gas, October was anything but.  After lots of debate on the run up about whether October could dislocate, the answer came very early and was a resounding no.  The major culprit on this occasion was a lack of wind and suddenly we were withdrawing from storage at the start of October, eeeeeeeeeeek.

We had a decent little rally on the flat price and the NBP-TTF BOM also blew up, causing carnage for anyone delivering it.  The brutal nature of the NBP-TTF move and lack of liquidity on the Balance of Month NBP contract caused quite a few players to have a painful stop out.

There were two interesting asides to this move:

·       I don’t have the outturn numbers, but I am very confident that if you had delivered front month into the prompt versus the second month all summer and certainly into Oct, you would be sitting on a decent P and L this year.  The most logical reason I have been offered on this is CTA’s unwinding their positions and therefore creating an opportunity for the physical market that can deliver.

·       Secondly if storage had been getting withdrawn in the first week of October back in 2015, the market would have gone totally bananas and we would have been shooting for the moon!!

It’s not 2015 though, it is 2025 and with LNG plentiful and the wind returning, the European gas market sorted itself out rather nicely and within 2 weeks, we were back to where we started the month.

The middle of the month had nothing really exciting to get hold of and the market ticked up because it had enough of going down and then trickled back off because it had no reason to go up.

Everyone was lacking direction and so enter stage left and the big orange one with one of his surprises.  Donald had seemingly had enough of Putrid playing him like a fiddle and decided to impose some meaningful sanctions on Russian oil.  With India, China and Turkey all taking immediate action, oil roofed and gas/robots followed like obedient little puppies. 

With gas not even mentioned by Trump and the EU only making changes form Q127, this robot led bull run was the big and obvious opportunity of the month.  This was compounded by the timing coinciding with some of the warmest ever temperatures seen for late Oct and Nov and some decent wind to boot.  R2D2 was left holding the baby as supply/demand and gravity took hold and gas headed South, closing the month at new lows.

The bear run lasted for a week and as usual in a market that is now global, it was bought to a crashing end earlier than the Yogi’s would have liked.  A mix of a Freeport outage and the temps looking more seasonal for a time, gave the bull’s something to get hold of and as I type we have had a couple of up days, bucking the trend of a mass sell off across equities and other commodities.

I believe Freeport is on the way back, we are in Winter and the weather looks pretty damn warm.  In 2015 that would have been bearish and I think that remains the same today!!!  The fact NBP-TTF has been consistently getting wellied adds weight and presumably lots of LNG to the argument

Good luck and let me know if you want to discuss coaching with me.

Rob

07818 012019

robert@thetradingcoach.co.uk