Starting on 22 December, European gas prices experienced - shall we say - a bit of a "rug pull". Within 10 days they crashed by 60%. Is the gas crisis over?
Thread 1/n
TTF (EU equ. of US price Henry Hub) crashed from a record $59/MMBtu down to $23/MMBtu within 10 days. Today, the price is back at $29 (left axis; $168/boe) or >7x (!) the price US consumers pay for their heating bill.
So no, the crisis is hardly "over". It gets worse.
2/n
Why did TTF (or it's UK equ. NBP) come crashing down in late December? Chiefly b/c Europe had an unusually warm weather patch. Warm weather meant less gas withdrawals.
3/n
High EU prices earlier in Dec H1 also meant a wide-open EU-Asia LNG arbitrage for US exports.
The new headline: "LNG flotilla" is heading to Europe. Narrative: Crisis solved. Well, not really. The "flotilla" couldn't move the EU gas market "dial".
Less gas withdrawals & more LNG importing was the recipe which crashed TTF from its "demand destruction levels". But did net EU injections of 3.5TWh for 2.5 days made a diffence?
5/n
Of course NOT. Overall EU gas storage fill is now at 55% (chart below) or where it was on 29 December 2021. The "flotilla" fixed 2-3 days of gas shortages, warmer weather another 4-5 days. Meanwhile, the EU remains 30 days "short gas", subject to weather!
6/n
Meanwhile, lower TTF prices stopped LNG shipments from the US into Europe. This is b/c the price arbitrage for shipments to Europe (as opposed to Asia) is now closed again. What hasn't changed however is Europe's need for more gas, urgently so.
Worse, high TTF prices forced some industrial output to be shut-in. After all, high commodity prices are supposed to do exactly that - reduce marginal consumption.
And now? Below seasonal consumption is roaring back up (chart: EU gas withdrawals (blue line) vs 8y-avg)
8/n
Consumption was already at record levels when compared to past 8y (as shown in chart above) as EU needs more gas for everything, but certainly for electricity generation. With a below-average cold temperature outlook (chart for 18 days; North-West EU), that will not change.
9/n
For more background on why Europe is in short supply of gas (the #hydrocarbon that provides power & heat) check this past thread. Upfront, the EU has structural supply issues, the alleviation of which need policy changes.
The Forward market however does not count on such policy changes. Instead it prices in a tighter EU gas market for years to come, as we illustrate below...
Finally, if somebody acuses you, @biancoresearch, that you are "clueless" or "if only media bothered to look at the numbers, it would have found out that #GAZPROM deliveries to EU are stable as a rock" - be careful b/c research is not their strength.
To be clear, the EU gas crisis has many reasons. But of course, Gazprom is one reason. It delivered 38% LESS gas into the CEE pipeline system when compared to 2019 levels (pre-Covid consumption). That is 600TWh of gas missing (net of S2M)!
How did he say, clueless!
13/13
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On this platform, certain perma bulls keep pushing a bullish crude narrative based on relative U.S. inventories—day after day, for three years now.
Their logic: Total U.S. crude inventories (including the SPR) are at 838 million barrels (orange line), 200 million barrels below the 10-year average → bullish!
Yet, inventories keep falling, and prices remain stuck in a range. Clearly, they are wrong.
1/9 @UrbanKaoboy @Iris62655179 @BrentRuditLeo
The problem with their logic?
a) The U.S. is no longer the marginal importer of crude oil—Asia is (or was).
b) U.S. inventories are artificially high on a 10-year average due to the shale boom, which took off in 2014. Shale growth and Covid distort the data, keeping inventories (ex SPR) elevated. So any 5- or 10-year comparison is meaningless—period.
2/n US Crude Oil Inventory ex SPR
Including SPRs, the picture looks more normalised - but not tight. But does the US really need 700mb of strategic reserves in 2025? I don't think so.
Yesterday, I shared a few thoughts that I’d like to expand on, especially given how volatile the current tariff landscape under this admin has become.
Navigating it isn’t just difficult—it’s nearly impossible to avoid missteps. Hopefully some traders will expand on my thoughts...
1/n
What do we know?
As at 23 March 2025, Comex copper price in New York is trading at 14% premium to LME in London. Buying a tonne of copper in NY costs $11,213 versus 9,842 in London, $1,371 per tonne more than in London.
2/n
Why is that? Because of tariff FEARS, not tariffs.
Traders are hedging future risk of potential tariffs on all forms of the raw material, such as cathodes, concentrates, ores, and even scrap. But there aren't such tariffs in place for copper yet (unlike alumnium).
The current Comex price action in the U.S. is basically a Trump tariff trade mirage and is otherwise as misleading of fundaments as the May 2024 price action of which I warned on multiple occasions.
1/n $/pound
In May 2024 however, U.S. price action was more in synch with London. But it didn't reflect weak Chinese housing & construction fundamentals which has been 15-30% of GLOBAL copper use for the past two decades. Today, U.S. prices trade as if borders close tomorrow.
2/n Comex - LME arb in $/t
Unlike May 2024, copper blue chips like $FCX, however, do not buy the rally. So at least it seems that the equity market understands the tariff aspect of the copper price mirage.
In this episode, we discuss China's 2nd of 5 economic paths it can follow.
This episode will also focus on Xi the leader. To understand Xi means to better understand China's economic path forward.
1/n #China
Can China replace malinvestment with more consumption?
Answer: Maybe a little bit & over a long time frame, but President Xi does not want to focus on this path. Instead, he wants to implement his socialist utopia.
2/n
Yes, China’s rising entrepreneurs were welcomed by the Communist Party for at least two decades. But all of that is in reverse.
Under Xi Jinping, China has moved full circle: from low growth & low freedom in the pre-reform era back towards something similar today.
In this episode, we discuss China's investment-led growth model & the first of 5 economic paths China can follow.
As you would expect, also this episode is full of Chinese characteristics!
1/n #China
Starting in 1990s, China’s economic engine has been fueled by capital investments.
Its central planning bureau defined GDP targets, picked winners and drove growth from debt-driven capital formations (green line).
2/n
Has any other nation tried this before, ever? Not to our knowledge.
We checked at ALL G20 economies and their respective growth models for past 70 years. 45% capital formation share is a unique experiment in economic history.
Over the past 3 years, we made some controversial calls in commodities. We decided to exit our oil holding in Aug 2022, we went short natgas in early 2023 or called for copper to go lower in May.
Why? Because we have an egde on China.
1/n #China
Yes, mainstream media picked up pace on important issues facing China today.
Most came to understand that the property bubble burst, that the economy is slowing, that geopolitical frictions are emerging, that there is too much debt.
But do they understand the underlying forces that drive these issues?
2/n
While the majority of these facts are known, most Western observers, investors & industrialists do not fully appreciate their interdependence & the structural changes that are unfolding in China today.