MARKET UPDATE

Natural Gas Buyers Hoarding Fuel at Sea to Prepare for winter

Energy traders and power utilities are storing more liquefied natural gas at sea, an unusual move to hoard supply for winter as the market faces a severe shortage.

Energy-starved utilities in Europe are parking LNG shipments off the coast in a scramble to replace Russian pipeline gas this winter. They can’t simply import the fuel into onshore storage because terminals are maxed out, and so are choosing to pay to keep the ship nearby.

Importers in Asia and South America have also jumped on the floating storage bandwagon, seeking extra supplies. At the same time, traders are looking to profit by storing LNG and cashing in when prices spike during the winter months.

 

Dollar Slips, Euro Approaches Parity Ahead of ECB Meeting

The U.S. dollar edged lower in early European trade Thursday, with the euro rebounding ahead of the latest European Central Bank rate decision, which is expected to result in another aggressive increase.

At 02:55 ET (06:55 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.2% lower to 109.630, retreating from Wednesday’s peak of 110.79, a level not seen since June 2002.

The euro makes up over 50% of the dollar index, and EUR/USD traded largely unchanged at 0.9996, climbing back towards parity after hitting a 20-year low of 0.9863 earlier in the week.

The ECB is set to make its latest policy announcement at 08:15 ET (12:15 GMT), as is widely expected to raise rates significantly to fight runaway inflation, even as the risk of a Eurozone recession rises.

The debate is over the size of the hike, with consensus moving towards an increase of 75 basis points, following the lead of the U.S. Federal Reserve, with the central bank seen as having limited time to try and wrest back control over record inflation before growth in the region stalls.

 

European Gas Prices Extend Falls After EU Announces Price Cap Measures

European natural gas futures fell to their lowest in a month on Thursday, extending their declines after the European Union proposed measures to bring wholesale energy prices down ahead of a looming winter energy crisis.

By 03:00 ET (07:00 GMT), the front-month Dutch TTF contract, which serves as a benchmark for northwest Europe, was down 5.1% at 201.00 euros a megawatt-hour, bouncing a little from the one-month low of 196.05 EUR/MWh that it hit at the open.

TTF futures are now down over 40% from their peak last month, despite Russia confirming fears that it will shut down all energy supplies to Europe over the coming winter. Benchmark power prices are also on the decline: fourth-quarter baseload futures for Germany having fallen from over 1,000 EUR/MWh at their August peak to close at 635 EUR/MWh on Wednesday, while baseload for the whole calendar year of 2023 closed at 556 EUR/MWh.

 

 

 

 

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