DEEP DIVE: The relentless pursuit of profit is squeezing consumers and killing gas demand
Check what TTF is doing today! On my substack Rekenen met Energie I made a bet "TTF will go to 35 in december", we are nearly there...
The price of oil has little* to do with its cost of production, transportation, refining and reselling; gas is marginally more complex; fewer facilities, less ability to swap cargoes and location. And it's financialisation is much, much deeper. And it's pricing, for better or worse, is broadly driven by two benchmarks**.
Gas will go the same way as LNG and not pipeline gas becomes the dominant price setting mechanism.
Efficient market hypothesis is a broken record of failure, but it will broadly find an equilibrium of sorts.
Your opening para is a condensed version of Ida Tarbell's history of Standard Oil. The corollary being that the best value barrels I ever sold was when we controlled the value all the way to the refiner; and the most expensive in a downturn.
* Yes the marginal barrel...
** Apologies to everyone who has written at length saying this isn't the case
Great analysis as usual, but I would see the futures markets dynamics different. mood swings are not one sided (inflating) but two-sided (and thus neutral). These dynamics are the same on all commodity markets, and not different for TTF. And these dynamics have been well analyzed in the past. The global gas market has been a seller's market over the past 2.5 years, and now likely slowly shifts into a buyers market as demand stagnates and supplies pick up. As long as there is the public perception that energy supplies are still at risk, European buyers are willing to overpay, and TTF trades at a premium to trade costs. The shivers from last year last. If there is someone to blame its rather the crisis narratives still prevailing in media and politics, not the the speculators.
Can we have analysis without the 15th century Dark Ages morality overtones, please?
This is a great explainer for those who are new to energy markets, but a bit old hat to more veteran observers/participants. You've got great stuff here, and you explain well. Maybe you could delve more into prognostication, and maybe talk about the factors that could drive the different future scenarios?
Are analysts asking these companies about this? Are they not seeing the Asian growth they predicted? Or does it not matter cause global growth is good? Or was that cleaner air growth always just a story and not in numbers?
There is a vampirism about the market in energy generally and they’re partying hard. Seems like they are desperately trying to put off the rising of the sun by turning up the music. We can dance along or we can leave the party.
Thank you for this clear analysis. It is indeed disturbing that TTF is so dominant and more and more a casino for high rollers. How will they react when the price keeps falling? Will they go for another playground like crypto or gold?