Asian and European gas prices hit a record high again on Friday driven by different factors, though with one common source – the continuing ripples from the Russian invasion of Ukraine.
That is being overlain in Asia by China’s spreading drought.
European gas prices rose above €343 per megawatt hour ($US100 per million British thermal units, or mBtus) on Friday confirming the growing threat to energy-intensive industries across the continent, not to mention hundreds of millions of consumers and small businesses.
Prices in Asia were driven above $US70 a mBtu’s to $US76.32 on Saturday, a new all-time high, up from around $US58 a mBtus the previous Friday and pushing the August gain to more than 72%.
LNG and natural gas prices have well and truly decoupled from crude oil and this is having a spreading impact across the globe.
Europe’s fertiliser industry association on Friday warned that 70% of production across the region had been curtailed by the rising price of gas which is threatening industries and threatening sectors from glassmaking to food production.
Europe’s benchmark gas price has soared by almost a third in the past week as traders and utilities rush to secure supplies ahead of the winter. Asia’s gain has been similar – around 31%.
Complicating matters was the warning from Saudi Arabia that it could cut oil production because of the slide in crude prices, a stance given more weight by the looming settlement of the sanctions against Iran – and freeing up its oil output – which would add more pressure on production from the rest of OPEC.
So the Saudi threat helped pushed crude prices higher on Friday especially and for the week – the interest rate warning from Fed chair Jay Powell added to the upward pressure on oil.
West Texas Intermediate (WTI) crude oil closed higher on Friday after Powell warned tight monetary policies and higher interest rates are likely over the long term, despite their cost to jobs and economic growth.
WTI crude for October delivery closed up 54 US cents to settle at $US93.06 a barrel, after trading as low as $US91.08 following Powell’s speech. WTI was up more than 3% for the week.
October Brent crude, the global benchmark ended at $US99.01 barrel, up 2.9% for the week.
Meanwhile energy firms increased the number of US oil and gas rigs but the count in August fell for the first time in 25 months, even as oil prices remain relatively high.
The oil and gas rig count rose three to 765 in the week to last Friday, according to energy services firm Baker Hughes Co.
That puts the total rig count up 257, or 51%, over this time last year.
Oil rigs rose four to 605 last week, while gas rigs fell one to 158.
In August, the combined oil and gas count was down two rigs after rising for a record 24 months in a row.
The oil rig count was unchanged on a monthly basis after rising for a record 23 consecutive months, while the gas rig count rose by one in August having remained unchanged in July.
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Gold closed lower on Friday in the wake of Jay Powell’s speech.
Comex gold for December delivery slid $US21.60 to $US1,749.80 an ounce.
Comex silver fell 1.7% for the week to close at $US18.74 an ounce while Comex copper rose 0.75% to $US3.711 a pound.
On the LME, copper traded around $US8,150.
Iron ore prices ended at $US105.55 a tonne for 62% fe fines in trading on the Singapore Exchange. That up around 5% for the week.
Australian coking coal prices edged up 2% to $US312.50 a tonne in Singapore, while the Newcastle ICE thermal coal price fell 4.4% to $US415.50 for October coal.
The strength in coal and LNG prices just won’t fade, despite the high levels both commodities currently trade at.
Normally that is a future problem for producers because high prices don’t last for long as more production enters the market and demand fades.
At the moment not even normal demand for energy can be met in Europe and parts of Asia for various reasons – the two month promonent being the continuing impact of the Russian invasion of Ukraine, the sanctions on Russia and Russia’s counter sanctions against Europe and anyone else, except China.
But while China is buying Russian coal and gas, it can’t control the weather or Covid which continue to weaken President Xi’s plans for the country and his aspirations to be President for life. He will still get there, but China’s economy is suffering as a result.
