It was another week of soaring natural gas prices as LNG demand from Asia appears to have picked up and the energy crisis in Europe deepens by the day. Ultra-dry and hot weather across Europe is creating problems with Norway’s hydropower and France’s nuclear facilities. And while water levels on the River Rhine may rise a touch in the coming days, they will remain exceedingly low and will continue to disrupt the transport of coal to Germany. We expect natural gas prices to remain sky-high at least until seasonal demand drops off in the second quarter.
Looking ahead, it is a relatively quiet week on the data front. We expect the August Flash PMIs for the euro-zone to fall further as declining real incomes weigh on demand. There may also be news on the talks between Iran and the West on a revised nuclear deal. If an agreement were reached, Iran’s output and exports would probably rise quite rapidly and we would revise down our oil price forecast accordingly.
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