Gas- and electricity prices are dropping FAST in Europe right now and they are likely going to drop further!

What is going on? 💲🪔A thread 1/n
Nat Gas prices have dropped from >300 EURs pr MWh to levels just north of 50 EURs and day ahead prices are even lower in many areas of Europe

Prices in Spain have dropped as low as 27 EURs pr MWh for Gas as there is currently a queue of ships waiting to off-load outside of Spanish LNG ports

This has led LNG within day prices to trade sub 25 (below the PVB price) as LNG operators are trying to get more room for the LNG waiting off-shore

MIBGAS (Iberian market) daily spot PVB trades at 27.75 EUR pr MWh, but the curve is still fiercely sloping upwards in to November and December.

Interestingly, the curve has a positive beta to spot developments, so even if the price action is currently driven by a short-term over-supply, it brings the ENTIRE curve down with it, even if it seems irrational

The same holds for TTF benchmark gas in the Netherlands

Fill levels in European gas storages are approaching 100% way ahead of the deadline 1st of November and paired with milder than usual weather, this leads to a very low net spot demand for Gas

Germany is for example still running large daily net injections into storage through mid-October as

1) The flow is decent
2) The temperatures are mild
3) The nat gas consumption among households and the industry is DOWN relative to 2021

There is hence very limited scarcity risks for October/November and the arrow points clearly DOWN for prices as a consequence. LNG ships are queing up and there is nowhere to place it..

This is likely going to bring the entire nat gas- and electricity curve DOWN in coming weeks at the very least until the heating season really kicks in through November..

The armageddon scenario is for now NOT worth talking about.. BUT...!

The 2023 supply is much less certain! LNG makes up 40% of the current supply of gas in Europe, but we are still running 20-25% below usual flow levels due to the lack of Russian gas

The winter just ahead of us seems to be save, but in 23 we may be in for renewed turbulence

If you want to follow my thoughts on European energy- and electricity markets, you can follow the free newsletter right here!

We will release a NEW update later today

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More from @AndreasSteno

Oct 19
Inflation is rolling over in right about every category but one in the US.. 📈📉 A thread 1/n
🇺🇸 Let's start with the supply chain crisis that everyone central banker and their mother referred to in 2021

Freight rates have fallen off a cliff and this is usually a strong hint that goods inflation will slow fast as well

Here is US freight rates vs US goods inflation

2/n Image
🇨🇳 Chinese freight rates went for the moon during the pandemic, but they have returned to mother earth lately and this is probably the most disinflationary chart you will see today

Shanghai freight rates tend to lead western good prices by 6 months

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Read 10 tweets
Oct 18
What's going on in the crazy FX markets? A thread 1/n

Brought to you straight from pizza-capital of Napoli
Over the weekend and continuing into this week, the USD has shown some weakness. The sterling rallied to a fresh six-week high against the Euro and neared October highs against the Dollar. The reason; Broadly improved investor sentiment and a return of fiscal orthodoxy

2/n Image
Despite its latest retracement, the Dollar remains ‘top dog’. With the turn of the month the momentum shifted though. GBP and EUR up some 8% and 3% respectively. Jeremy Hunt’s reversal to a more sustainable fiscal trajectory offered the markets some reassurance.

3/n Image
Read 7 tweets
Oct 17
What is going on in equity markets?🤯 A thread on the back of a BOOMING start to the week 1/n
First up, a quick glance at the major equity indices around the world, where last week’s inflation report ended up souring the markets in the US, while mainland Europe was/is green. Todays close will bring most indices up versus a week ago 2/n
In the US we have entered earnings season and we might get an idea whether or not we are beginning to see cracks in earnings, which have otherwise held up the last 6 months.

Read 9 tweets
Oct 16
A fantastic cross-asset discussion with my old boss @MikaelSarwe is on the cards in this weeks edition of "The Macro Trading Floor"

Find the podcast on YouTube and all podcast apps! Will link below!
For Video
Read 4 tweets
Oct 15
This is how traders are positioned across assets 💲 .. A thread 1/n
Starting in FX space..

USD longs have increased lately, while speculators are still net LONG EUR, which seems almost bizarre.

Note that MXN position is short still, which leaves a decent risk/reward in MXN longs vs. EUR

Commodity position remains (strecthed) LONG overall with a few outliers

Nat gas position is still short, while Crude positions are net LONG .. albeit at low open interest.

Could short Oil vs. Long Gas be an interesting trade for the winter?

Read 11 tweets
Oct 13
Real rates are rising rapidly.. What to do about it from a trading perspective?

A thread 1/n
Rising real rates is a natural consequence of disinflaiton as nominal bond yields rise, while priced inflation drops. This is exactly what central banks want right now..

The GBP example right here

When real rates rise, multiples tend to become compressed .. This has been an extra strong pattern since 2013 in US equities..

Real rates now point to Forward PEs of around 11-12 on the SPX, implying levels around 2700 with unchanged earnings..

Read 5 tweets

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