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The Energy Report: Baby It's Cold Outside

Published 12/23/2024, 09:44 AM
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While Crude Oil WTI Futures stays locked in a boring trading range a coming cold blast has sent natural gas soaring to a the highest price since January of 2023. This comes as shoppers rush home with their treasures fighting a very cold Christmas holiday week. Even as it appears we will get a warm-up after Santa arrives, the potential for a polar backlash in January has the natural gas market on the rise.

Nat Gas supplies in Europe are also on the rise.

John Kemp Energy points out that “Europe’s gas inventories have reverted close to average for the time of year after an unusually fast depletion since the start of this winter wiped out most of the surplus inherited from the unusually mild winter of 2023/24.

Inventories across the European Union and the United Kingdom (TADAWUL:4280) were just 46 terawatt-hours (TWh) (+5% or +0.42 standard deviations) above the prior ten-year seasonal average on December 18. The surplus had narrowed from 122 TWh (+13% or +1.38σ) when winter started on October 1 and 277 TWh (+71% or +2.03σ) at the end of last winter, according to storage data from Gas Infrastructure Europe. Stocks have depleted by 201 TWh since October 1, the fastest draw for eight years, and compared with a ten-year average of just 126 TWh.

The tightness of natural gas supplies in Europe raises questions as to what Europe is thinking about when it comes to energy security.

Reuters is reporting that – Qatar will stop shipping gas to the EU if member states strictly enforce a new law cracking down on forced labour and environmental damage, Energy Minister Saad al-Kaabi told the Financial Times in an interview published on Sunday.

The Corporate Sustainability Due Diligence Directive, approved this year, requires larger companies operating in the European Union to check whether their supply chains use forced labor or cause environmental damage and to take action if they do. Penalties include fines of up to 5% of global turnover.

Oil Price reported that “it’s happened again. The Druzhba pipeline—Russia’s aging oil lifeline to Europe—has gone silent, leaving Hungary, Slovakia, and the Czech Republic without their usual crude oil fix. According to sources, the culprit is a “technical issue” at a Russian pumping station in the Bryansk region. Transneft, the pipeline’s operator, has yet to speak on the issue, but Belarus has confirmed the disruption, saying its refineries are dipping into reserves to keep running.

This pipeline, capable of carrying 2 million barrels per day (bpd), has been trucking along with just 300,000 bpd lately, thanks to sanctions and Europe’s pivot from Russian energy. Still, for nations like Hungary and Slovakia—granted waivers by the EU due to their heavy dependency—this hiccup is a headache.

After the big spike up on Sunday night natural gas has pulled back him with the warm upcoming there could be some more profit taking but if the forecasts hold up January is going to be wickedly cold and there could be a squeeze back to the upside of natural gas the hedge funds have added to their long position so they must be convinced that the cold is coming and it’s going to settle in from long wintry nap’

Oil is stabilizing in a trading range, but the products are moving higher cold temperature is shed increase the demand for diesel we should also see the markets start to establish an uptrend soon because the predicted glut of oil supplies just isn’t happening.

This comes as Iran is trying to dump 20 million barrels of oil before sanctions really start to bite this may be Iran’s best chance to get rid of some oil before the Trump sanctions hit.

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