European electricity markets are completely out of sync with fundamentals and we have spent most of this week understanding why - here is our take-away!
Nice work Andreas, I agree with you. Also - isn't it stunning that daily gas prices in Germany are now already back below the highs from March at the beginning of the year? We're back down to €225 per MWh. Fingers crossed this trend continues.
Sorry, but what you say simply is not true.
The Power of Siberia gas pipeline, which has more capacity than Nordstream 1, took less than seven years - and not the 12 that you mention - from the go ahead until it was pumping gas to China. And it was not built on an emergency footing, as Russia would presumably do today. China and Russia are currently working on two more pipelines between the two countries.
Anyone who claims that China and Russia can’t build gas pipelines has yet to persuade me.
Enjoying your perspective. Good write up.
Europe better have a lot of gas flowing their way, because storage will not bail them out. There is a physical limit to how much gas can be taken from storage on a daily basis. That amount is not near enough to meet demand on an average winter day.
Fantastic insight and massively appreciate the perspective
Great write up, Thanks Andreas. It sounds to me like there is too much margin, speculation and pure paper trading in the NG and electricity futures markets. The gold and silver markets are purposely designed for massive paper trading and artificial price suppression disconnected from physical supply and demand. Do these same design flaws also exist in the NG and electricity futures markets? Can these markets be redesigned to better serve society rather the paper trading, mouse clicking speculators? Hilsen.
Nicely wrote. This means there is high chance that Putin's final nuking action (something like self crude export ban by 5mln b/d) could hit in this winter given that Putin does not have any medium term strategy left.
Your analyses are always very interesting.
Hi Andreas. IIRC Russia has about 5% of the GDP of NATO. It may have started off with an advantage, but in a long economic war it's not a fair fight.
P.S. On the other hand, West Europeans and North Americans might be less willing to pay the economic price of the war than the long-suffering Russian people (who also don't have much choice about it).
Great post Andreas. Fantastic to see you dive deeper into the energy markets. Good to have a long energy read from you backed up by meaningful charts and numbers.
Yes, clean spark went crazy, and we also see spreads trading towards extreme levels that don’t match fundamentals but that are most likely driven by fear, counterparty credit and exchange margin issues. But what can you do if you can’t trade your power on the exchange or otc? And what do you do when things clearly go one way? You jump on the train, which amplifies things.
And yes things cooled down a bit, but with the nuclear challenge in France and the real cold not in the forecasts yet, the show is far from over.
Would love to see more energy related posts from you.
Interesting takes as always. Thanks!
Great analysis! It seems like Fintwit has turned into a huge echo chamber of doom and gloom that puts ZeroEdge to shame. Of course it's bad, but it's not going to be the end of the world. And when you look ahead just a few years, Europe will be completely energy independent from Russia and will hold all the cards.
Meanwhile, Russia will be an even more desolate place. Half of the Reuters articles I read today are prefaced with "This content was produced in Russia where coverage of the Ukraine war is prohibited" or something like that. And people seriously believe that they are doing great.