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Alexander Stahel 🇺🇦 Profile picture
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Nov 4 • 8 tweets • 4 min read
Don't mix up the recent collapse in EU gas spot prices with the pain for consumers and CPI readings yet to come.

Take GER consumers/SMEs: they are yet to absorb the pain from higher wholesale gas future prices for utilities in the coming months.

1/n #TTF #LNG @kittysquiddy
Following a one-off payment in Dec of 8.3% of the annual household bill for gas, Germany will cap consumer prices for gas for households at €120/MWh for 80% of their usual consumption. Beyond that, consumers/SMEs will pay the wholesale (future) price for any additional gas.

2/n
1M forward TTF (EU wholesale natgas hub price) surged as high as €313/MWh in Aug 2022 (hight of NS1 sabotage panic) and are now €114/MWh (€33/MMBtu).

However, as GER still gets some gas under long-term contracts, actual IMPORT prices are a better proxy for pain to come.

3/
GER import prices were €100/MWh above historical avg in Aug & Sep. Judging by the increase in the heating-gas component of the German national consumer price index, some €60/MWh of the surge in import prices had been passed onto consumers by Oct.

4/n
The German price cap model for consumers/SME is a risky strategy for the government's household financing.

Wholesale prices are likely to go higher once winter weather commences because EU utilities are yet to replace lost l-term natgas contracts with l-term LNG contracts...

6/
...while the LNG spot market will become tight come 2023 and beyond as more LNG export & import terminal capacity does NOT equal more UPSTREAM GAS capacities globally.

7/n #LNG
Remember, the only certainty for EU natgas prices is more volatility as we explain below in much detail.

8/8 Thx
Oh, and then this

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More from @BurggrabenH

Alexander Stahel 🇺🇦 Profile picture
Nov 1
Russia is mostly struggling to find new markets for its 7.4mbpd crude & product exports in Jan 22, despite $22 discounts.

Prediction:
a) come Dec, the world will lose up to 1.1mbpd of RUS crude;
b) come Feb, the world will lose 0.5mbpd of RUS product barrels;

Here is why

1/
Let us start at the beginning.

Since 2017, RUS has been producing 10.7-11.5mbpd of crude. Of that 50% has been exported.

RUS also exported up to 1.8mbpd in the form of petroleum products (e.g. Diesel, Naphtha, Gasoline, Jet, etc.).

RUS consumed up to 4mbpd.

2/n
Where did 7mbpd go to?

OECD Europe bought up to 4mbpd of RUS crude & products. China up to 1.6mbpd, rest of Asian 0.7mbpd.

Add rounding error purchases for Med Region, the odd crude quality purchase by the US and Belarus' Druzhba pipe imports and you got the market place.

3/n
Read 27 tweets
Alexander Stahel 🇺🇦 Profile picture
Oct 25
How long will EU gas prices and with it EU power prices and likely the Euro, inflation expectations and European rates get a break?

Anwer: It (mainly) depends on weather. So what is the forecast?

1/n #TTF #NBP #EUR
The main consumers of gas is North West, Central & South East EU. We disregard Nordics which consumes little.

North West temps are currently 6% higher than its 30-y normal - a lot!

Temps are forecast to stay above normal into Dec. However, post 10 Nov only by 1.5%.

2/n
Both South East & Central Europe are 5% above 30-year normal temps too. Both regions are forecast to normalise after 10 November.

That will leave gas storages constrained well into Dec.

My hunch is that gas prices will not recover much until storages go < 55% (Jan/Feb).

3/n
Read 12 tweets
Alexander Stahel 🇺🇦 Profile picture
Oct 23
The only certainty for European natural gas prices going forward is volatility, volatility and more volatility.

Here is why...

1/n #LNG #TTF Image
The Great Rotation: With the invastion of Ukraine, VVP decided to use gas as a weapon & cut pipeline flows into Europe.

In return, Europe maxed out LNG terminal capacities & contracted every available free LNG cargo globally to compensate the collapse of Russian flows.

2/n Image
Europe was able to attract LNG by being the best business globally.

How? By offering the highest prices. A cargo owner such as Trafigura or Total which bought LNG at Cheniere in US for $4.1/MMBtu + $3 gasification fee in Jan 2022 booked a pre-shipping profit of $21/MMBtu.

3/n Image
Read 14 tweets
Alexander Stahel 🇺🇦 Profile picture
Oct 19
Let us look at the European gas market.

Why has TTF collapsed? Is Europe out of the woods? What matters for commodity price formations? What will matter in 2023...?

1/n
European gas prices - both TTF & NBP - have collapsed right into the start of the winter season, down from its peak of €338/MWh post Nord Stream 1 sabotage news to now €63/MWh.

Mind you though, TTF was €13/MWh 2 years prior - up still 370%.

2/n
Why is TTF lower?

Because natgas can only be consumed or stored. If storage is (95%) full & not consumed (mild weather), prices have to do the work to keep system balanced as comdties trade in present (d-s), unlike equities/bonds which discount future.

3/n EU storage in %
Read 16 tweets
Alexander Stahel 🇺🇦 Profile picture
Oct 11
Let's look at Russian crude oil & petroleum product flows after 7 months of war.

Did the six sanction packages as announced by the European Commission already have an effect on exports?

1/n #Russia #OOTT @kittysquiddy @UrbanKaoboy @kingofcrude @AndurandPierre @AzizSapphire
Upfront, we collect a lot of data in real time and yet, we have to make certain assumptions. Such cells are marked in yellow for ease of reference.

On that basis, implied Russian crude production has reduced by as much as 1.5mbpd since January 2022 - a lot.

2/n
Who is buying less, who is buying more RUS crude?

OECD Europe buys 1.4mbpd less crude (sanction in Dec); Japan & Korea also down 250kbpd.

China up 100-150kbpd (little; they like diversifiction);

India up from 40 to 800kpbd;

Med Region up 150-200kbpd.

3/n
Read 10 tweets
Alexander Stahel 🇺🇦 Profile picture
Oct 5
OPEC+ quota cut was clever leadership by HRH MBA.

Among others, it removes 0.8-1.0mbpd of PRODUCTION, bringing KSA back to a sustainable profile while it may not reduce OPEC EXPORTS as KSA/UAE/K consume less crude themselves in winter. Yet, it should keep the shorts in check.
@kittysquiddy @AndurandPierre @UrbanKaoboy @econ_713 @kingofcrude @anasalhajji @AzizSapphire @staunovo @Amena__Bakr @ARaj_Energy
I subscribe to everything HRH said. Media with brand names like @Reuters either hire the right journalists or do not deserve answers. Energy security is not a boulevard topic. Media outlets must understand their responsibilities in this too (underinvestment; climate hysteria).
Read 4 tweets

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