I am always fascinated when I read something that seems contra to the narrative we are being fed by the mainstream media and what follows really did have me scratching my head. If we are to believe what we are being told by the BBC etc. we are in the middle of a very serious energy crisis, supplies of gas to Europe have been restricted because of Russia’s invasion of Ukraine and the closing of the Nord Stream pipelines; resulting in incredibly high prices and threats of blackouts etc. BUT, maybe things aren’t quite as they seem.
The following is taken from a communication I received yesterday from 7IM Investment Management.
“The English Channel is the busiest shipping lane in the world; more than 500 ships a day pass between Dover and Calais.
It’s even busier at the moment, because there are over 60 tankers moored smack bang in the middle – the red dots on the map below.
More than half of these are carrying Liquified Natural Gas, waiting to deposit it into specialist terminals in the UK, France, Belgium and the Netherlands – those green triangles.
Some of them have been bobbing around there for over a month.
But if we have an energy crisis, why aren’t these ships unloading? Is supply and demand dead?!
Source: 7IM/Bloomberg/ https://www.marinetraffic.com/
Well, no. Economics isn’t broken. It’s just really difficult!
There are two things at play here.
First, October 2022 was seriously warm – the seventh hottest since 1884. The mean temperature across the UK was 11.5°C, nearly 2% warmer than normal. In London on 29th October, it was 23°C! Lots of those tankers started their journeys (from the US or Qatar) expecting Europe to have already started turning on the central heating. But we didn’t. So, our day-to-day demand was lower.
Second, the campaign to stockpile gas ahead of the winter has been extremely successful – see the table below. Europe’s storage is at 94% of total capacity - with the understandable exception of Ukraine. That stored gas accounts for nearly one third of normal annual consumption for Europe, so those tankers aren’t needed yet.
Source: https://agsi.gie.eu/
Now, we don’t know how cold this winter will be. Or how windy it will be. Or what will happen with Russia. Commodity prices are influenced by so many external factors, it means any statements about gas prices in the next few months (higher or lower) should be treated with extreme caution.
PS.
The data on Marine Traffic is incredible.
Just look below at the “Pleasure Craft”; all yachts leaving the Mediterranean and heading for the Caribbean for the winter …
Not at all relevant for investing, more for reasons of envy …
Source: 7IM/Wikimedia Commons/ https://www.marinetraffic.com/
I do hope you found the above as interesting as I did.
As always, if you have any concerns about your own financial arrangements or would like to discuss whether you are truly making the most of your money, please do not hesitate to call me.
With kind regards,
Yours sincerely
Graham Ponting CFP Chartered FCSI
Managing Partner
