July in European Energy
For lots of European Gas Traders, July was a much better month and probably the easiest we have had in a long term. We got something that in the good old days was called, “a trend” and from the 1st July until the 24th July the market rallied around 20 euros, with very little sign of any Trump nonsense or pullbacks.
The maths were fairly simple:
Ever tightening fundamentals + daily escalation = price go up
On the fundamentals side it was the perfect storm, with war, weather and Asian demand for LNG leaving Europe looking decidedly dodgy as Norwegian maintenance and winter begin to approach at top speed!
On the war front, the bombing once again starting apace on the 8th July and with the Houthis joining the fray around the middle of the month, things were looking worse and worse by the day.
Interestingly, the last time we had a war, a drought, LNG competition and rubbish European storage stocks, we were @ 300 euros and gas traders all over the world were about to enjoy the pay day of a lifetime!
Clearly an awful lot has changed in the world and trading in those intervening years and time will tell whether 65 euros was the top and whether it has offered enough of a risk premium to get us through Winter 26 !
All good things come to an end and by Monday the 27th the gravy train was at a juddering halt. The Americans had decided they were running out of targets and were also running low on interceptors.
The market collapsed 8 euros and the bearishness fed into Tuesday before a bounce and a definite change in market behaviour. Traders seemed to grow in bullish confidence and rightly so, with no sign of any extra gas or oil on the horizon and tit for tat exchanges seeing various ships finish the day with a hole in the engine room.
Wednesday was a very strong day and then on Thursday with the market back in full on bull mode, Trump opened his mouth AGAIN. He made a pinky promise that everyone was talking and that a deal was close. Both markets did drop and finish the day softer, but there was a definite air of traders calling his bluff and the down move was much less severe than it had been during previous attempts to put a lid on it.
Friday was the most interesting day and one that I called totally wrong. Me and the Asian markets called the overnight news bearish, but as the Europeans walked in, it was obvious their interpretation was very different. The bulls were in total control all day, with the American session ending a very difficult weak in extremely strong fashion as Donald was again threatened to “bomb the s**t out of Iranian infrastructure”.
I am happy to admit that I struggled with how badly I called Friday wrong, but having evaluated things closely it was a combination of factors:
· Over confidence after a very good week and a stand out Wednesday
· Thought the bearishness would continue and flush out more length
· Saw the Hamas deal, interpreted it as bearish and stopped looking at other news
· Discussed with valued client who has way more information and saw things differently, but decided I was right!!!
· Gave my interpretation of the news way too much weight against the ever increasingly bullish fundamentals
Even trading coaches make mistakes though and I have to admit I was embarrassed, annoyed, angry and gave back over 50% of the weeks P and L. On the positive side, I had followed my plan, stayed disciplined and it wasn’t a total disaster. I was also stopped out by 9am, so once I had calmed down, I made some small tweaks to my process and began to enjoy my weekend!!
As I type this am, August has begun in a much more difficult fashion for a gas market that was still carrying a lot of length. Someone will write a story in years to come, called “The Trump who Cried Wolf” and that’s exactly what seems to have happened. Just as the market gained enough confidence in the fundamentals to begin to call “bull shit” on The Orange Man, it looks like there might actually be some gravitas in his latest attempt to talk peace.
Traders, need two gears at the moment, neutral and super charged and if July was the moment for the super charge button, I think the prudent move now is back to idling.
If it really kicks off again, we will be shooting for the stars and there will be lots of opportunity to get in from the bullish perspective and if it is actually all over, things could get even more messy.
Note to the reader: I love AI and am using it to improve my offerings as a coach and my own trading performance, but all articles are 100% written by me!!!