David Fuller and Eoin Treacy's Comment of the Day
Category - Energy

    LNG Market Supply to Remain Tight for Years, Top Producers Say

    This article from Bloomberg may be of interest to subscribers. Here is a section: 

    Liquefied natural gas will be in short supply in the coming years as production lags behind surging demand from Europe, according to the world’s top producers of the fuel.

    Global LNG demand is unlikely to peak for another 20 to 30 years, Qatar Energy Minister Saad Al-Kaabi said at the Energy Intelligence forum in London. Meanwhile, supply will remain “structurally short” until there’s significant new production capacity, which will be 2026 at earliest, Meg O’Neill, chief executive officer of Australia’s Woodside Energy Group Ltd., said at the event.

    Their comments add to a growing chorus warning that Europe’s worst energy crisis in decades is unlikely to end soon. While the continent looks set to cope this winter, it’s next winter when the supply shortage will really bite as Europe tries to replenish its stockpiles without Russian imports.

    “Next winter is going to be the problem,” Al-Kaabi said. “It doesn’t look like it’s getting better.”

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    Email of the day on looking at lots of charts

    Dear Eoin, In the 1960s and 1970s subscribers to the David Fuller Chart Service received a booklet containing hundreds of charts each week or each month. I used to come into the office at 6a.m. and complete the point and figure charts each day. Thanks to this work, I gained a reputation among my colleagues for being the first one to spot changes in the long-term trends of both overall markets, sectors and individual shares. As of this morning, I am getting up one hour earlier and I will start by looking at all the daily charts of the Autonomies in the Chart Library. Let's hope that this will produce the same result. This morning's work show very small blue upward marks in almost every chart. These are tiny upward movements in the year-long major decline in all these share prices. This "summer's swallow" has not yet started chirping. Regards,

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    The Freeport LNG Paradox

    This article from Goehring & Rozencwajg may be of interest to subscribers. Here is the conclusion:

    With the announcement that Freeport will likely resume exports in October, much sooner than originally planned, combined with low inventories and a gas supply that has shown little in the way of growth, we believe the risk of a Q4 price spike in North American natural gas is once again high.

    Natural gas has quickly gone from relative obscurity to geopolitical lynchpin. In the summer of 2020, seaborn LNG reached a low of $1.90 per mmcf while oil prices turned negative. Together, this represented the lowest energy costs in human history. Two short years later, LNG has risen 30-fold to $58 per mmcf, representing the highest energy costs in human history. Such is the result of a decade of underinvestment. Given the fragility of the world’s energy supply, it is no wonder tyrants and despots are moving to weaponize fuel sources. We do not expect this trend to stop and recommend investors position themselves accordingly. We remain extremely bullish on North American natural gas and recommend investors continue holding their natural gas related equities.

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    UK Seeks 20-Year Gas Deal With Norway to Avoid Winter Blackouts

    This article from Bloomberg may be of interest to subscribers. Here is a section:

    The UK is in talks with Norway to secure a natural gas contract of potentially 20 years in a bid to stave off the risk of winter blackouts, a person familiar with the matter said.

    Ministers are discussing a price with their Norwegian counterparts, according to the person, who asked not to be named discussing sensitive matters. The business department didn’t immediately respond to a request for comment.

    Because of the length of contract under discussion, there’s a risk that locking in long-term gas contracts now might leave the UK exposed to high costs in years to come. Current volatility means producers could demand higher prices to guarantee strong profits as it’s unclear how much money they could make by selling on the spot market in the future instead.

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    Brazilian Assets Soar as Presidential Race Goes to Runoff

    This article from Bloomberg may be of interest to subscribers. Here is a section:

    Brazilian assets jumped after President Jair Bolsonaro secured his way to a runoff election against Luiz Inacio Lula da Silva as investors cheered on the incumbent’s better-than-expected showing and bet his leftist challenger will be forced to moderate his stances in the second stretch of the race.   

    Lula, as he is universally known, took 48% to Bolsonaro’s 43%, Brazil’s electoral court said, with almost all votes counted.

    That tally left Lula without the simple majority needed for an outright victory, as some opinion polls had suggested, and set the two up for a bruising face off in what has already been a divisive election campaign.

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    House Sales Collapse as UK Lenders Withdraw Mortgage Offers

    This article from Bloomberg may be of interest to subscribers. Here is a section:

    Deals for house purchases are collapsing after lenders pulled mortgage offers in response to soaring interest rates.

    Smaller lenders such as Kensington, Accord Mortgages and Hodge were among those to say they were withdrawing products Tuesday. That follows the decision by Lloyds Banking Group Plc -- the UK’s biggest mortgage provider -- on Monday to halt some offers, while Virgin Money UK Plc temporarily stopped offering home loans to new customers.

    Major firms weighed in later Tuesday. HSBC Holdings Plc told brokers it was removing new mortgage products for the rest of the day while Nationwide Building Society announced that it was increasing rates across product ranges starting Wednesday. Banco Santander SA said it was removing some products and increasing rates on many others.

    Jessica Anderson, a 33-year-old who works in publishing, was set to buy a house in Walthamstow, east London, with her husband until the seller pulled out last week.

    “We’re in an uncertain position where we’re not sure whether it still stands,” she said, regarding the couple’s mortgage offer. “Since the approval there have been two interest rate increases.”

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    Putin Raises Gas Pressure as He Moves to Annex Ukraine Regions

    This article from Bloomberg may be of interest to subscribers. Here is a section:

    Russia threatened to cut off the last gas pipeline to Ukraine’s European allies and moved to annex a large chunk of Ukrainian territory amid a string of military setbacks in the seven-month-long war.

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    OPEC, SPR May Make $80 the New $60 for Oil

    This note from Dow Jones may be of interest.

    Tightly managed supplies by the OPEC-plus group and signs Washington will start restocking crude siphoned off from its Strategic Petroleum Reserve if oil falls to $80 suggests oil prices will stay relatively high despite a global economic slowdown, BofA Global Research says. "As spare capacity dwindles and capex lags, we think $80/bbl is now the new $60 for Brent crude oil," it says in a note. "Said differently, the 'OPEC-plus put' on average oil prices is higher today." It adds that a recent signal by OPEC-plus to reduce production even as oil traded above $90 was unprecedented, and a good indication it'll do what it takes to keep a floor on prices.

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    Germany Tightens Control Over Industry With Russian Oil Grab

    This article from Bloomberg may be of interest to subscribers. Here is a section: 

    Germany seized the local unit of Russian oil major Rosneft PJSC as Berlin moves to take sweeping control of its energy industry, secure supplies and sever decades of deep dependence on Moscow for fuel. 

    Alongside its move for the Rosneft unit, Chancellor Olaf Scholz’s administration is in advanced talks to take over Uniper SE and two other major gas importers, Bloomberg reported on Thursday. Germany is pressing ahead with an historic overhaul of its economy just two and half years after the Covid-19 pandemic, grabbing control over a huge chunk of its industrial base to prevent shortages and blackouts this winter. 

    A decision on the next moves could come within days. The need for action is urgent with Uniper losing 100 million euros ($99.7 million) a day as it tries to replace Russian gas to maintain deliveries to local utilities and manufacturers.

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    The Future of Copper

    Thanks to a subscriber for this report from S&P Global which may be of interest. Here is a section from the conclusion:

    Notably, neither scenario assumes that the growth in new capacity—expansions and new mines—speeds up. Absent a major policy shift, however, regulatory, permitting, and legal challenges, combined with long timelines for new mines to come onstream, will continue to dampen the pace of supply increases. This supply-demand gap for copper will pose a significant challenge to the energy transition timeline targeting Net-Zero Emissions by 2050. The challenge will be compounded by increasingly complex geopolitical and country-level operating environments. These include

    The strategic rivalry between the United States and China—over a projected period in which China will remain the dominant global supplier of refined copper, while the United States depends on imports for well over half its copper.

    Russia’s invasion of Ukraine and its cascading effects on the commodities markets and energy security, which have highlighted the vulnerability of supply chains. “Supply chain resilience” policies aiming to secure reliable supplies of the materials needed for energy transition—and economies in general—are likely to be a central feature of the emerging geopolitics.

    A growing tension between energy transition, social license, and ESG objectives that dramatically increase the need for minerals like copper on one hand, while raising the compliance, legal, and operational costs of mining those minerals on the other.

    The risk of a significant, structural increase in copper prices as the supply-demand gap increases, with a potentially destabilizing impact on global markets and industry. While structurally higher prices incentivize international investment in new capacity, governments in sourcing countries are likely to seek to capture domestically a rising share of revenues.

    The fragmenting of globalization and a resurgence of resource nationalism. The resulting challenge for all actors involved with the energy transition will be to manage often competing and seemingly contradictory priorities. It is clear that technology and policy innovation will both be critical to reducing the supply-demand gap for copper in order to help enable the net-zero goals

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