Energy market for the week: Europe is again restless with gas

The gas rally continues in Europe, as the market is no longer waiting for a repeat of the previous warm winters and the beginning of the heating season turned out to be surprisingly record-breaking in terms of depletion of reserves. At the same time, the stoppage of Russian gas supplies continues to hang over the European Union like a sword of Damocles. Against this background, everything looks much calmer in the oil market.

Oil

Donald Trump has not yet occupied the White House, but oil is getting cheaper. However, for other reasons. This week, the quotes of the benchmark North Sea Brent dropped from $ 74.9 per barrel to $ 72.3.

The market is still talking about the fact that oil supplies in the world will grow. However, in China, demand will not be such as to support prices, the market believes.

"The mood among oil traders has turned very negative due to concerns about the global economy, especially about the Chinese economy and demand growth, as well as concerns about whether OPEC+ will be able to balance supply and demand," Stratas Advisors president John Paisey told Reuters.

Earlier, OPEC lowered its forecast for global oil demand growth this year and next. China's oil consumption is expected to increase slightly, but structural economic problems in the country and an increase in electric vehicles may limit growth.

"We expect OPEC+ to announce another three—month extension of cuts — until April 2025," said Kim Fustier, head of European oil and gas research at HSBC Bank. He does not rule out that OPEC+ will postpone the increase in production until the end of the year due to low prices.

In this situation, American companies are unlikely to want to follow Donald Trump's call "storms, baby, storms." At least, the representative of Exxon Mobil said that the oil giant will take into account the economic component more, not the volumes.

Gas

Gas in Europe continues to rise in price. During the week, deliveries from the TTF hub for the month ahead increased from $ 522 to 533 per thousand cubic meters. These are the highest quotes in the last 12 months — since the end of November 2023.

Norwegian operator Gassco said that this winter gas exports from the country will be at a record level. At the same time, there are high stocks in the storages of the EU countries.

However, in November, the European Union has already set a record for gas extraction from underground storage facilities, and meteorologists predict the coldest winter in the last three years. The situation is worsened by windlessness in Europe, which leads to additional demand for gas for electricity generation. And, of course, the threat of stopping Ukrainian transit and all Gazprom supplies due to US sanctions against Gazprombank, which is a key link in payments for pipeline gas with European consumers.

Reuters noted that the demand for gas from the largest producers of liquefied natural gas in the United States soared on Friday to almost record levels, which may indicate the requests of buyers, including European ones.

For the first time in many months, coal quotes this week did not follow gas, but went down. Coal supplies from the Antwerp — Rotterdam — Amsterdam hub (ARA) for the month ahead dropped from $ 123 per ton to $118. Coal is also actively used for electricity generation, but now European consumers prefer to increase more environmentally friendly gas generation, even though gas prices are again becoming critically high for European industry.