Hope for a “kitchen sink” neighborhood where businesses flush out all the bad news at once
GAZPROM “Force Majeure”
Gazprom retroactively invokes force majeure over natural gas supplies to “at least one major customer” from June 14 – Nord Stream 1 turbine dispute has started, according to Reuters. There are no details beyond that, but Uniper was Gazprom’s biggest customer, and it said it started pulling gas from storage last week.
It is interesting that Gazprom continues to try to maintain some level of legal cover for its behavior, perhaps evidence of the (misguided, in my view) view that there is a return to a normal relationship with European buyers medium term.
On Monday, Russian newspaper Kommersant reported that Canada would fly the NS1 turbine by plane rather than ship it to speed up the process of restarting NS1.
Crude oil is higher to start the week, with Brent rising more than 4% despite news of rising covid infections in China raising the risk of further lockdowns or, at the very least, arguing for more easing. slow restrictions already in place.
The support appears to come from the recognition that concerns about a Saudi Arabian and OPEC bid response were unfounded after Biden’s visit to Saudi Arabia provided no concessions.
The OPEC+ deal ends in September and oil had fallen in part due to fears that Saudi Arabia and others with spare capacity could pledge to increase production once released from quotas. OPEC+ production.
The sentiment of strategic investors in the energy sector remains the same – OPEC has limited spare capacity and is unlikely to rise to the occasion, especially after the colossal correction in oil prices. The next OPEC+ meeting is scheduled for August 3.
China stepped up its policy support in the second quarter, but covid-related restrictions limited their effectiveness. That said, investors in the energy sector are bracing for the prospect of the government further building political support in the second half of the year, likely offering future infrastructure projects and financing. The sentiment was also bolstered by Hong Kong health officials considering easing restrictions and boosting natural immunity.
Three important events await us this week in Europe. First, Nord Stream 1 maintenance ends on Thursday, and the market is eagerly waiting to see if natural gas deliveries resume on Friday. Second, Italy could be heading for a snap election – attempts to form a new coalition have so far been unsuccessful and Prime Minister Mario Draghi is addressing the Italian parliament on Wednesday. Third, the European Central Bank is meeting this week and will likely deploy its anti-fragmentation tool.
Risk sentiment began to find a base late last week, and investors backed off from a 100bp hike by the Federal Reserve, instead focusing on a 75bp march for July. As a result, the greenback is giving up some of its recent gains against the euro.
With EURUSD trading below parity last week, some market participants are cutting positions for the time being, heading into a crucial week for the Eurozone, primarily the European Central Bank and Nord Stream I maintenance uncertainty .
However, to change market sentiment in the medium term, it is necessary to improve the underlying situation in Europe, in particular energy supply, fear of recession and fragmentation.