October 8, 2024

• Oil: above $80 a barrel
• Natural Gas: up 23% since mid-September

Oil is up because of concern that supply from Iran—even under sanction—will affect total output of oil and cause a sudden mismatch to demand.

• Iran republic about 1.7mn barrels of oil a day from its southern coast.
• Goldman Sachs says a six-month disruption affecting 1mn b/d could force the price to mid-$90s if OPEC does not ramp-up production to fill the gap.

For natural gas in Europe, things have changed a lot since the start of the war in Ukraine.

The European market has adjusted with large parts of the industrial capacity utilizing natural gas (such as chemical maker BASF) shut down. Other forms of energy came online (coal) and major imports of LNG from the USA have resulted in a semi-stable market.

The European storage that is used (mostly) for winter heating is full.

However, gas prices are rising as shipments of liquefied natural gas from Qatar are likely the first to be affected if there is all out war in the Middle East.

• 1/3rd of gas the EU uses come from imported LNG, which is much more expensive than Russian gas along a pipeline they were using before the war.
• 10% of their imported gas comes from Qatar.
• Ships bound for Asia are heading to Europe instead.

That's enough to affect global gas prices and enough to drive anger of capital at the slow developments of LNG processing on the west coast of Canada and the USA. Prepare for over the top comments about "national security" from oil and gas execs.

All wars in the Middle East are Oil Wars.

Some news this morning picked-up the Desjardins article that outlines why a Trump election is likely bad for Canada. The bank analysts said that the tariffs that Trump is proposing would hit the Canadian economy, mostly because the USA likes to import our "energy" and we import more from the USA than export to them.

For non-bankers, there are other more existential reasons that a Trump presidency in the USA would be bad. Not just for Canadians.