Today, Ukrainian Transit Operator OGTSU annouced force majeure on gas deliveries from Russia to Slovakia (Velké entry point) due to damages of facilities in occupied territory which cannot be accessed for repairs.
More observations on EU/US sanctions on Russia & possible implications on logistics disruption.
In April, India bought Russia crude for frist time ever. It bought 15mb in April according to news, altough we yet only measure 9mb as at 17 April 2022 through @Kayrros.
How much crude needs to be diverted to Asia if self-sanctioning (or EU ban) bites? At least 2.9mbpd of Russian Urals in EU (1.6-1.8mbpd seaborne; 1.3mbpd Druzhba pipeline system into the EU) need to be diverted. So far, seaborne loadings increased in March! Time will tell.
Apr 22 • 5 tweets • 3 min read
Dollar Wrecking Ball - Brazil exports 55% of global #soybeans (mainly to China). Issue: US export 35% which seems to set international prices. That turns soybeans farming in Brazil into poor business at current potash prices ($1250/Mt) b/c of BRL-FX rate.
There have been 8 shocks to the global food prices - yes eight (8). Most of them are ongoing!
1/n As for team transitory,…
No 1 - War: Ukraine, which was known as the ‘breadbasket of the FSU’, has 1/4 of world’s ‘black soil’ fertile land. In 2021 Ukraine accounted for 20%, 7%, 18% of global exports of barley, wheat & corn, respectively. It is under attack & VVP wants this war to be a food crisis.
Apr 19 • 4 tweets • 2 min read
“Lower fertilizer use [b/c of higher cost] may mean a smaller crop. The International Rice Research Institute predicts that yields could drop 10% in the next season, translating to a loss of 36m tons of rice, or the equivalent of feeding 500m people.” bloomberg.com/news/articles/…
“Rice farmers are particularly vulnerable. Unlike wheat & corn, which have seen prices skyrocket, rice prices have been subdued due to ample production and existing stockpiles.”
It’s important to listen to an educated bearish view in any trade & be able to justify why “the opportunity (crude >$100) exists.”
My view on Ed Morse’s bearish oil price outlook:
a) Bias: Ed is around since the 70ies & knows a thing or two but is bear since 2014/15;
b) he doesn’t handicap US shale growth enough for diminished DUCs inventories or the constraint of capital, labour & supplies such as frac sand/rigs/pipes;
c) he underestimates the ongoing risk to OPEC exports in an already tight market (as seen for Libya in last 2 days);
Apr 11 • 4 tweets • 2 min read
2022 outlook for oil is rock solid. Why? Crude prices of inventories incl reduced SPRs. In Q2 however, combo of SPR releases into seasonally weak demand + China lockdowns will calm short-term spreads & affect sentiment somewhat while curve went up at long-end vs 1 month ago.
But record Brent pricing in March meant barrels were already being drawn into Europe from all over the world to plug self-sanctioned Russian losses. Those now overlap with 1st tranche of SPRs announced in March, causing spreads to normalise (they may test contango briefly).
Mar 31 • 12 tweets • 5 min read
The newsflow on Russian gas payments in past days remains confusing. My current interpretation of the situation and the status quo of the market...
On 23 March the Kremlin requested EU gas deliveries to be denominated in rubel. Putin said: “If these payments are not made [in rubel], we will consider it a failure of the buyer to fulfil its obligations, with all the ensuing consequences.”
The oil market in 6 Tweets - rest is noise (I know, I like the rest too but it won’t matter for coming months).
Oil is an extractive industry. The industry needs to replace ONE North Sea each year (3mbpd) just to stay still (more in future due to base declines). That needs $600bn. Industry didn’t and does not invest it. Meanwhile demand is back at pre-Covid levels.
Mar 14 • 5 tweets • 2 min read
I recommend reading the full “deal” to reopen Nickel trade at LME on Wednesday, 16 March.
I mean are u kidding me: $3.5bn trades canceled! The guy still short 150,000 tonnes! Refused to “be closed out”!? JPM agreeing not to increase margins etc…!
In any extractive industry this is a revolving question for shareholder, boards & managers once stable cash flows & a strong balance sheet have been established.
Make (develop) has significant potential to create value (something out of nothing) but comes with significant delay between cash-outflows & returns (15+y) & at risk of total capital loss. Which is why the market does not reward it.
Jan 27 • 5 tweets • 2 min read
$SQZ is rock solid: 58mboe 2P Res from 5 fields with soild maturity mix (Columbus); comes off milestone payments for BKR acqu.; N&S Egg growth pipe; UK lowest E&P tax rate ex US; access to services; conventional fields; top mgmt; zero EV in 2022?
GB 500p intrinsic value.
Check out its potential cash flow profile (without growth capex for North & Egg) or potential well interventions for BKR in 2022 for, perhaps, $80m. FCF would be $537m. Deduct $50-80m and it may still be zero EV by year-end due to gas price futures curve. Insane!
Jan 17 • 4 tweets • 3 min read
EU gas: Right now & hear, #Gazprom uses gas export as political weapon. It books but does not use; bookings became useless indicator of what might flow in pipes. Latest: even NS flows reduce.
So far, EU compensated with warmer weather & LNG, as illustrated below.
Last month, Gazprom booked 21% of Mallnow’s (GER entry from PL) capacity for Jan, yet there have been no flows. In Dec, the company used daily pipe allocations for that route after opting against booking capacity for the whole month. Nor do Flows enter Poland (from BL).
Jan 13 • 10 tweets • 6 min read
Macro shorts commodities on 1bps of inflation deceleration. Mind u though: demand is half the story nor the real story!
Years of underinvestment should make shorting oil, EU/A gas or metals risky business this time & in absence of a deep recession due to Fed mistake.
Nickel - the battery metal - first. If you short Nickel, you deserve to lose all your capital. Reason: ignorance!
The EU is in a gas crisis, the details of which we explained in various threads on this channel.
Ironically however, the liberalisation of the European gas markets is a huge success story. A brief history & some present day observations on gas security (#Gazprom).
With the liberalisation of EU gas & electricity markets in 1998, in theory consumers were able to freely choose their supplier & shop for the best deal. However, most households and businesses still lacked a real choice of supplier well into 2014. Why?
Jan 8 • 13 tweets • 6 min read
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?
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.