November in European Gas!

I am not going to insult any gas traders out there by saying November was an easy month, but after a tentatively bullish start, it certainly offered a trend and gave Yogi’s something to really get their teeth into.  The end result was a very bearish month that broke through the much talked about 30 euros and so far, hasn’t looked back.

The tricky part of the equation for fundamental players came just before the middle of the month as the weather models started pointing to some prolonged looking cold weather.  Historically a cold spell mid-November would have led to an almighty bull run and I certainly can’t blame anyone for going long at this point.  Throw in balances that are not particularly lose and people clearly expected something more impressive than the 1 euro we struggled to climb. 

There wasn’t much wind in the sails to begin with, but news of the latest Russia Vs Ukraine peace plan surfaced around the 19th of the month and the momentum was lost altogether.  By the Friday the EC AI model had started to back away from the cold and it was timberrrrrr time and a very soft end to the week.

While I have sympathy for anyone who added length at the start of that week, I have next to none for anyone who held it over that weekend.  The models were all trending warmer, Russia Vs Ukraine was definitely closer and the lack of an up move suggested that there was some serious selling pressure in the market, both from physical LNG players and also funds who were starting to take big short positions.

Lots of people did stay long and I heard various reasons for them doing so, but none of them were very good.  They seemed to originate more from stubbornness, hope and the cherry picking of information, rather than any genuine belief.  The weather and the chickens came home to roost and by Monday the exit door was crowded by bulls who had given themselves a needlessly difficult weekend of worry and a much large P and L hole than necessary.

The apparent LNG selling, the weather and the momentum have all continued to align in Yogis favour and so has the move down.  Plenty of people are offering their opinion on Russia and Ukraine, but I believe the current silence from all sides suggests we are closer to a deal than many are predicting and that could be another big nail in gas’s coffin.

For anyone with bullish tendencies, there is hope, but patience will probably be key.  Spreads have done next to nothing in this big flat price move and even went up at one point.  That doesn’t point to an overly bearish fundamental picture and every conversation I have had for the last two months, people have been pulling back on their end of Sum 26 storage level numbers. 

At some point a Chinese bid will probably appear, but no doubt that will be done in a very stealthy way and by the time the market realises it, it will be too late.

And lastly for Bertie bull, anyone who was bullish has now given up and that’s usually when the market roofs!!  

Overall it was a great month for Yogi and also for anyone who had short TTF Vs HH and to a lesser extent Carbon positions.  Hopefully the momentum continues for the many that called it right and December brings a positive end to a really difficult year.

Rob

07818 012019

robert@thetradingcoach.co.uk