European Gas Prices On The Decline

Early start of summer and ample LNG supply push gas prices down

European natural gas prices have been on the slide for several days now as an early start of summer combines with ample LNG supplies to quench supply worries. According to a Bloomberg report, natural gas prices in Europe have been on the decline for five days now as demand eases while supply remains strong thanks to LNG and continued deliveries by Gazprom via Ukraine and the Nord Stream 1 pipeline.

Europe became the biggest buyer of U.S. liquefied natural gas a few months ago as it sought to reduce its dependence on Russian gas even before Russia’s invasion of Ukraine. This has led to a spike not only in gas prices but also in LNG carrier rates, which recently hit the highest in a decade.

Despite the lower demand, gas prices in Europe remain quite elevated as importers seek to refill their reserves ahead of the next heating season. Some of these might be worse off than others as Gazprom suspended deliveries to Poland, Bulgaria, the Netherlands, and Denmark over their refusal to pay for the gas in rubles.

Still, most of the large gas buyers that supply European countries with natural gas from Gazprom have accepted the latter’s payment terms, ensuring the uninterrupted supply of gas. According to unnamed sources cited by Bloomberg today, Gazprom was unlikely to cut off supplies to any other European buyers for now.

https://oilprice.com/

Has Gasoline Price Shock Triggered Demand Destruction Yet?

Where Will Gasoline Prices Go from Here?

Following the dizzying spike in gasoline prices, the question arises when demand destruction will set in, where people start driving less, start taking it easier to conserve gas when they do drive, or start prioritizing the most economical vehicle in their garage. If enough people do it, demand begins to decline, and gas stations have to compete for dwindling business. Demand destruction is what would cause the price to come down again. Are we there yet?

The Energy Department’s EIA measures consumption of gasoline in terms of barrels supplied to the market by refiners, blenders, etc., and not by retail sales at gas stations. The volume of gasoline supplied has fallen for the third week in a row. This is unusual this time of the year, when gasoline consumption normally rises through the summer.

The EIA reported on Thursday that gasoline consumption fell to 8.61 million barrels per day in the week ended April 8 on the basis of a four-week moving average (red line), the lowest since March 4, down 2.3% from the same period in 2021 (black line) and down 8.1% from the same period in 2019 (gray line).

https://wolfstreet.com/

China’s Industrial Slowdown Could Kill The Commodity Rally

Chinese factory growth was at its slowest in July in 15 months

One of the biggest drivers of the surge in metals prices this year, the world’s top commodity consumer China, is showing signs of a slowdown in demand, which could drag down copper and iron ore prices for the rest of the year after a blistering rally in the first half.

Chinese factory activity growth slowed down to the smallest in 15 months, imports of copper and iron ore are also slowing down amid surging prices and curbs in China’s steel manufacturing, while authorities are releasing metals stocks from reserves to cool rallying prices which raise manufacturing costs. All these factors from the past few weeks are bearish for the Chinese demand—and as a result, imports—of metals such as iron ore, copper, zinc, and aluminum, Reuters columnist Clyde Russell notes.

Although analysts say that slower Chinese demand doesn’t necessarily mean lower commodity prices, because of tight global markets, China may not be a key driver of metals demand through the end of 2021. That’s because of slowing factory growth, authority-mandated caps on steel manufacturing, and the release of tons of metals from China’s reserves. The Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) showed this week that Chinese factory growth was at its slowest in July in 15 months, also because of high raw material prices, especially for industrial metals.

https://oilprice.com/

The inflation risk from Joe Biden’s stimulus plan is exaggerated

The challenge is to fight the economic crisis by raising demand

Rising US bond yields show that financial markets fear Joe Biden’s $1.9tn fiscal package may stimulate the US economy too much and lead to unwanted inflation. But will it? Although the US president’s stimulus package seems massive, it consists of several parts, each with a different economic impact. Nearly 40 per cent of the package, or $750bn, will be used to aid mass inoculations and fund states and local governments. This will not produce much of a boost to gross domestic product, although additional funding for local governments could reduce additional lay-offs, which is a positive.

About $1tn will meanwhile be used for direct income subsidies to households in the forms of rebate cheques, child tax credits and higher unemployment benefits. There is also $150bn of financial aid for vulnerable businesses. Overall, household and business subsidies total $1.15tn, although the size of the final package could be trimmed somewhat because of the resistance by Senate Republicans.

https://www.ft.com/