Traditionally, either October or November used to be the month of the year when the price of gas would start going up again after Summer and Autumn as Winter approaches, the weather becomes colder, and demand for gas increases.
For this year, the price of gas, both in the US and Europe closed lower in the month of October. We are going to set a new precedent if the price of gas ends even lower in late November. The precedent would be that despite a severe and immediate cutback of supply in the market (Russian gas to Europe), the price would still go down with new supply. This would leave Russia with an excess supply of gas which is desperate to sell but has difficulties exporting it to buyers who are buying more of it such as China. When Russia solves its logistical problems to transport gas to its new buyers, the amount of supply in the overall market would be much bigger than the supply of previous years. This is logical speculation but all the fundamental data show we are going to this trend, with the inevitable conclusion that Russia will face a severe Venezuela-like crisis as the gas price crashes. There is no evidence, so far that backs the theory by the oil and gas salespeople – who many times disguise themselves as “technical experts” – that world demand for gas will outstrip supply to the extent of pushing prices higher. And the only way this theory can be true for the oil market is because OPEC is a rigged and controlled market where supply is severely controlled by a cartel. The reality is that the world is excessively abundant in oil and gas.
Fundamentals show that gas capacity in Europe is only increasing and gas sellers are finding difficulties selling their gas as storage in many places seems to be full-up.
After the price of gas in the market went exuberantly high with the irrational panic of “Russia freezing Europeans to death”, rationality crept back slowly at the price and decimated it, so much so that Russia’s sudden and immediate closure of its Nordstream supply didn’t affect the market price at all. Since September, the market has been telling us that the exuberant gas prices hit in Summer have been irrational and unrealistic.
Malta is also set to lose hundreds of millions of Euros on its gas purchases as it set the price of its gas purchases according to changes to the oil price when the current trend is clearly much more in favor of gas prices going down.
Personally, my position is this. I have closed all my gas shorts which I opened at the beginning of September at a profit and have no positions left. But I will be shorting any bounces in the price which I may see as irrational – the six Dollar figure is surely sellable for me.