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The Last Stage Of The Gas Bubble

By FxPro Financial Services Ltd (Alexander Kuptsikevich)CommoditiesAug 16, 2022 06:41AM ET
www.investing.com/analysis/the-last-stage-of-the-gas-bubble-200628568
The Last Stage Of The Gas Bubble
By FxPro Financial Services Ltd (Alexander Kuptsikevich)   |  Aug 16, 2022 06:41AM ET
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NG
-0.44%
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LCO
-0.31%
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CL
+0.14%
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Oil experienced intense pressure on Monday, but the price of natural gas continued its upward trend. This contrast is due to an under-supply of Russian gas to the European market and more speculation around Iranian oil, which could quickly add more than 1m BPD. That said, macroeconomics is now on the side of the energy bears, with only geopolitics temporarily feeding the bulls.

Gas prices in Europe have surpassed $2,500 per 1,000 cubic metres
Gas prices in Europe have surpassed $2,500 per 1,000 cubic metres

Gas prices in New York are approaching $9 per million British thermal units (1M BTU). This is the area of the May-June highs. A steadily higher price was last seen in 2008. But these high prices have little to do with what Europe now faces.
 
Gas prices in Europe have surpassed $2,500 per 1,000 cubic metres, the highest since March 8. Europe and America are different markets, and it is not correct to compare prices directly. For example, converted to US standards, current prices at the Dutch hub are close to $70 per 1M BTU. That is 7.8 times higher than in New York. By comparison, in mid-2018, when there was a lull in this market, the difference was 2.6 times.
Gas prices in New York are approaching $9 per million British thermal units
Gas prices in New York are approaching $9 per million British thermal units

 It is logical to expect that the price difference between Europe and the USA will narrow on both sides, which implies an increase in the USA and a decrease in Europe. But it is worth looking at the first and easiest substitute for gas - crude oil.
 
Europe is working hard to increase the world's oil supply, with efforts to conclude the Iran nuclear deal. Yesterday's news on the subject sent Brent nearly 5% down to $92.2 and WTI to $86.30, its lowest level since the end of February, reflecting a market surplus.
 
The downtrend in oil prices, which has lasted for more than two months, suggests that right now, we may be witnessing nothing more than a speculative attack on gas, inflating a bubble in its final stages.

Experience suggests that in such cases, we see a sharp acceleration before the bubble bursts with a bang. With the gas case, we should be prepared for prices in Europe to surpass $3000 and in the US to break through $10 before the final downward reversal.

The FxPro Analyst Team

The Last Stage Of The Gas Bubble
 

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The Last Stage Of The Gas Bubble

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Comments (5)
Oh Youngkyu
Oh Youngkyu Aug 23, 2022 9:06AM ET
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Are you god..?
Notvery Goodathis
Peteymcletey Aug 16, 2022 4:03PM ET
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Thanks to green energy, more coal being used than in a long time. yay?
Phong Nguyen
Phong Nguyen Aug 16, 2022 1:18PM ET
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Dont think it will hit 10 before collapsing. 9.50 max ! But chance to see 4-5 by October is greater than NG will hit 10+ in August.
el cohen
el cohen Aug 16, 2022 9:57AM ET
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great article
apostolos sideris
apostolos sideris Aug 16, 2022 9:32AM ET
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simple and clear thinking.thank you!
 
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