Energy Sector

[Spekulatius]

The FT article seems a bit contrarian but that’s the way I see it too.  The elevated NG prices in Europe are about to collapse. They are already down ~50% from this super spike in July when Putin turned off the NG.

Spoiler could be an extremely cold winter.

https://www.ft.com/content/be331b8e-3a24-4941-b6d0-aa3041f789cf?ftcamp=traffic/partner/feed_headline/us_yahoo/auddev

 

The progress in Germany is summarized here:

https://www.bmwk.de/Redaktion/EN/Pressemitteilungen/2022/09/20220901-bmwk-charters-fifth-floating-lng-terminal-while-infrastructure.html

Edited October 10, 2022 by Spekulatius

[ValueHippie]

I hope so, but don’t think so. Without russian gas, storage will be empty before winter is over. The only solution is to reduce demand drastically. Given all the subsidies, I don’t see how we can reduce consumption by 15%+. Fingers crossed though

[lnofeisone]

15 hours ago, Spekulatius said:

The FT article seems a bit contrarian but that’s the way I see it too.  The elevated NG prices in Europe are about to collapse. They are already down ~50% from this super spike in July when Putin turned off the NG.

Spoiler could be an extremely cold winter.

https://www.ft.com/content/be331b8e-3a24-4941-b6d0-aa3041f789cf?ftcamp=traffic/partner/feed_headline/us_yahoo/auddev

I'm glued to European weather models and generally tracking US weather and what we are seeing is pointing to a cold winter in Europe (La Nina with hurricanes in the US). It also looks like there won't be as much wind either. Overall, Europe is in a precarious position, and the first cold snap will show a lot. Few positives:

 

-US is headed for warmer than average winter

-Asia is looking to have average to above-average warm winter

 

So while Europe may have cold weather, the price of natural gas will likely stay where it is now or probably be a bit lower. I think Europe will be fine sourcing nat gas without too much competition. Freeport is going back online in December as well. 

[Spekulatius]

2 hours ago, lnofeisone said:

I'm glued to European weather models and generally tracking US weather and what we are seeing is pointing to a cold winter in Europe (La Nina with hurricanes in the US). It also looks like there won't be as much wind either. Overall, Europe is in a precarious position, and the first cold snap will show a lot. Few positives:

 

-US is headed for warmer than average winter

-Asia is looking to have average to above-average warm winter

 

So while Europe may have cold weather, the price of natural gas will likely stay where it is now or probably be a bit lower. I think Europe will be fine sourcing nat gas without too much competition. Freeport is going back online in December as well. 

@lnofeisone and @ValueHippie you could well be right. I do feel that a lot of pessimism is build in valuations for Euorpean manufacturing stocks. As someone who works in the US in manufacturing it is really hard to compete against Europeans now with the USD- Euro exchange rate as it is.

 

This matters more for France and Germany etc who actually have manufacturing, rather than the UK which has financialized their economy and doesn't really make anything any more and exited the European Union. The UK is in way worse shape than the EU countries in my opinion.

Edited October 11, 2022 by Spekulatius

[Dinar]

5 minutes ago, Spekulatius said:

@lnofeisone and @ValueHippie you could well be right. I do feel that a lot of pessimism is build in valuations for Euorpean manufacturing stocks. As someone who works in the US in manufacturing it is really hard to compete against Europeans now with the USD- Euro exchange rate as it is.

 

This matters more for France and Germany etc who actually have manufacturing, rather than the UK which has financialized their economy and doesn't really make anything any more and exited the European Union. The UK is in way worse shape than the EU countries in my opinion.

Spek, do the work on Spirax Sarco Engineering, I think that you will be very impressed with the business.  

[TwoCitiesCapital]

6 hours ago, lnofeisone said:

I'm glued to European weather models and generally tracking US weather and what we are seeing is pointing to a cold winter in Europe (La Nina with hurricanes in the US). It also looks like there won't be as much wind either. Overall, Europe is in a precarious position, and the first cold snap will show a lot. Few positives:

 

-US is headed for warmer than average winter

-Asia is looking to have average to above-average warm winter

 

So while Europe may have cold weather, the price of natural gas will likely stay where it is now or probably be a bit lower. I think Europe will be fine sourcing nat gas without too much competition. Freeport is going back online in December as well. 

 

I was listening to someone on macro voices talk about US nat gas and the Freeport facility back in August-ish. 

 

His argument was with that facility down, you'd have expected everything that was being exported from it to result in a glut of gas in the US and a build in inventories. 

 

But even with that "glut" of gas not being exported for months, inventories in the US are still at the very low end of where they seasonally are compared to the last 5 years. His argument is US gas prices rise to the global market price once that shortage becomes apparent. 

 

Just parroting all of this - I know nothing of nat gas markets nor do I have a trade on, but it seems to make sense and I confirmed the inventory levels on the EIA website. 

 

[lnofeisone]

@TwoCitiesCapital - I agree with the assessment you heard with the assumption that shortage becomes apparent if the US gets a cold winter.

 

Around June, the US was at five year low on gas stockpiles. After the June fire, stockpiles of nat gas in the US started to rise. Not as fast as in previous years, but still rising. We are still well below the 5-year average but trending up from a 5-year low.

 

Freeport will likely lower European prices and raise US prices a bit. If the US gets warm winter weather, we can comfortably export to Europe without too big of a price increase. In either case, I expected European prices to stay elevated but not as high as where they are now (for TTF or NBP). A shrewd operator (looking at you VET) should be hedging 2+ years out and just printing $. 

[dealraker]

1 hour ago, TwoCitiesCapital said:

 

I was listening to someone on macro voices talk about US nat gas and the Freeport facility back in August-ish. 

 

His argument was with that facility down, you'd have expected everything that was being exported from it to result in a glut of gas in the US and a build in inventories. 

 

But even with that "glut" of gas not being exported for months, inventories in the US are still at the very low end of where they seasonally are compared to the last 5 years. His argument is US gas prices rise to the global market price once that shortage becomes apparent. 

 

Just parroting all of this - I know nothing of nat gas markets nor do I have a trade on, but it seems to make sense and I confirmed the inventory levels on the EIA website. 

 

Began working as a brokerage analyst in the late 1970's and over time decided to invest or not in the energy sector based on percentage of market cap.  Wasn't long ago, once again on the bipolar sector, that the the S and P Energy Index was 1/2 the market cap of Microsoft.  Over time that's probably too low...or so I decided once again.  

[Ulti]

16 minutes ago, lnofeisone said:

A shrewd operator (looking at you VET) should be hedging 2+ years out and just printing $. 

We will find out shortly

[Spekulatius]

2 hours ago, TwoCitiesCapital said:

 

I was listening to someone on macro voices talk about US nat gas and the Freeport facility back in August-ish. 

 

His argument was with that facility down, you'd have expected everything that was being exported from it to result in a glut of gas in the US and a build in inventories. 

 

But even with that "glut" of gas not being exported for months, inventories in the US are still at the very low end of where they seasonally are compared to the last 5 years. His argument is US gas prices rise to the global market price once that shortage becomes apparent. 

 

Just parroting all of this - I know nothing of nat gas markets nor do I have a trade on, but it seems to make sense and I confirmed the inventory levels on the EIA website. 

 

All these foibles around crude and oil are annoying when NG is really the energy source that matters, both in Europe and in the US. Biden should do all he can to encourage NG production in the US to allow exports to Europe and to make sure there is no problem in the US. having high NG prices in the US will cause all sorts of negative externalities, much more so than high prices at the pump.

[Gregmal]

8 minutes ago, Spekulatius said:

All these foibles around crude and oil are annoying when NG is really the energy source that matters, both in Europe and in the US. Biden should do all he can to encourage NG production in the US to allow exports to Europe and to make sure there is no problem in the US. having high NG prices in the US will cause all sorts of negative externalities, much more so than high prices at the pump.

He d rather just keep writing checks to Ukraine. There’s so much weird shit that just escapes my ability to comprehend how certain things are occurring in the world right now, and at the top of the list is the situation with energy. 

[Spekulatius]

42 minutes ago, Gregmal said:

He d rather just keep writing checks to Ukraine. There’s so much weird shit that just escapes my ability to comprehend how certain things are occurring in the world right now, and at the top of the list is the situation with energy. 

Checks to the Ukraine are a great investment. Keeps this particular problem out of our way for decades to come.

 

Energy is tied to this and needs to take into account the shortfall that is mostly NG not crude. The Russians keep selling crude just like they used to, because they have to.

Edited October 11, 2022 by Spekulatius

[lnofeisone]

1 hour ago, Ulti said:

We will find out shortly

Indeed, my fellow VET holder. 

[Dinar]

10 minutes ago, Spekulatius said:

Checks to the Ukraine are a great investment. Keeps this particular problem out of our way for decades to come.

 

Energy is tied to this and needs to take into account the shortfall that is mostly NG not crude. The Russians keep selling crude just like they used to, because they have to.

Why are checks to Ukraine a good idea?  The biggest threat to the USA is China, Pakistan - a nuclear state with crazies, not the crumbling Russian Empire that now realizes that it is a paper tiger.

[mjm]

1 hour ago, Spekulatius said:

All these foibles around crude and oil are annoying when NG is really the energy source that matters, both in Europe and in the US. Biden should do all he can to encourage NG production in the US to allow exports to Europe and to make sure there is no problem in the US. having high NG prices in the US will cause all sorts of negative externalities, much more so than high prices at the pump.

I do not really know myself, but are there enough LNG tankers and unloading terminals to accommodate the NG if it was shipped to Europe?  Believe they were shifting tankers from Asia to Europe.

[Spekulatius]

1 hour ago, mjm said:

I do not really know myself, but are there enough LNG tankers and unloading terminals to accommodate the NG if it was shipped to Europe?  Believe they were shifting tankers from Asia to Europe.

Yes, LNG tankers are shifted. China for example needs way less LNG. That said, I do not know the supply chain situation that well.

[Xerxes]

Any thought in using iShares MSCI Qatar ETF | QAT as vehicule to capture the directional trend that the natural gas bonanza will have on the country of Qatar.

 

It is not clear how much of the windfall would actually come into Qatar proper itself. I would think a lot of it would go to its sovereign fund outside the local economy, but some of it should flow down and be the tide that would be lifting the boats.

[Mephistopheles]

I think I answered my own question:

 

prediction: We will go back into an Iran deal that’s more advantageous for Iran than the last one.

[Gregmal]

18 minutes ago, Mephistopheles said:

I think I answered my own question:

 

prediction: We will go back into an Iran deal that’s more advantageous for Iran than the last one.

Art of The Deal

[RadMan24]

8 hours ago, mjm said:

I do not really know myself, but are there enough LNG tankers and unloading terminals to accommodate the NG if it was shipped to Europe?  Believe they were shifting tankers from Asia to Europe.

No and yes, most of it is being built up as we speak. All major ship yards are filled with LNG and to an extent container ships. You can't build any other type of ship for several years. But, that backlog takes some time to come into market. 

[Spekulatius]

5 hours ago, Gregmal said:

Art of The Deal

Javier is incorrect- the Saudi we’re all in on the oil embargo in 1974.

 

I don’t think we get a deal with Iran though, except maybe a narrow nuclear proliferation deal. Optics are terrible with the protests and Iran delivering weapons to Russia.

I think we see something with Venezuela- much less hostile and dangerous and it’s right at out doorstep.

[mcliu]

Kind of interesting the US would rather negotiate with Venezuela than build pipelines to Canada.. so much for ESG and supporting democracy 

[Xerxes]

The only comment I would have is that the OPEC cartel became OPEC+ as a defensive measure against the resurgent shale industry back few years ago (post-2014).  
 

It has nothing to do with Biden or anybody else. It was the American ingenuity in tapping its vast reserves that pushed OPEC into OPEC+.  

Edited October 12, 2022 by Xerxes

[Gregmal]

https://www.cnbc.com/2022/10/13/biden-admin-asked-saudi-arabia-to-postpone-opec-cut-by-a-month-saudis-say.html
 

Sounds like we need to have impeachment proceedings 

[Ulti]

31 minutes ago, Gregmal said:

Sounds like we need to have impeachment proceedings 

I dont know about that but this Strategic Reserve release has been one huge

political sham...Biden certainly has increased future geopolitical risk with the move and has made the US much more vulnerable to OPEC+

Coordinating and building out clean fossil fuel infrastructure jointly with our northern neighbors should be our country and both parties primary focus .

https://podcasts.apple.com/us/podcast/energy-permitting-needs-reform/id1081481629?i=1000582461840

good podcast on the issues of permitting etc\Columbia Energy Exchange