August in European Gas
August was a very interesting and pretty intense month in European Gas. For those of you who can remember the end of July, we were actually in bear mode and that trend continued into the new month and actually picked up pace. There was lots of diplomatic efforts from various countries and it did at one point look like we had the best chance of heading back to some agreement loosely focussed around the June MOU.
Yogi’s last stand for now came on Wednesday 5th august where a 3.5 Euro down move flushed out the last of the weak bulls and saw the front month finish in the mid 52 Euro’s. No peace deal came to fruition and we were back to an uneasy truce, where Iran and the US were not lobbing anything at each other, but were not on speaking terms either.
The market took no deal as very bullish and since that day the market has had a fairly old school feel about it and has pretty much shot straight up. The bulls argue that we are running out of time to fill storage, are massively under prepared for winter and any bearish headlines have been pretty much hoovered up by existing length or other traders wanting to join the party.
While the warm weather has abated for now, it does look like the boiling hot summer has one more sting in the tail and with an extended Orman Lange maintenance, seasonal Norwegian maintenance, Russia Vs Ukraine extremely hot again and the obv delay of Rass Laffan, it doesn’t look pretty. Throw into the mix the Germans somewhat belatedly worrying about storage and the head of THE this week stating “we are ready to buy if we get the nod” (not their exact words, but my interpretation), the similarities to 2021 are casting a rather nasty shadow.
Thankfully we are not @ 300 euros as I type, but plenty of traders will argue that 70 euros is not enough. As a noble and impartial coach I want to offer both sides of the argument and there are people who don’t agree with the bullish thesis and I have listed some bearish arguments I have heard below:
· “you can’t buy up here”
· “there is no Asian demand”
· “it will get sold on Friday”
For me the biggest shift change of the month came from the status of the Iran war and dare I say it, Trump and the US might be winning. Iran looks fragmented and broken, is skint with very limited oil income, inflation is rocketing and the gulf states have come up with some pretty cool work rounds and a decent amount of oil at least, exiting the straight.
Throw in the back breaking sanctions and suddenly its Iran talking about peace and the more moderate people within the regime admitting that they are in bother. There has been lots of articles from Iranians discussing peace and return to the MOU, with Trump strangely quiet and “in no rush to continue negotiations”.
Clearly this would probably be a good point for any normal leader to get back round a table, but time will tell whether Donald’s ego can allow common sense to prevail and the last 48 hours would suggest the opposite.
The IRGC tried to slip some mines into the straight to bring a halt to the clever bypass scheme and the Americans went to town on them. Tit for tat strikes have continued since and overnight the TTF nearly touched 75 euros.