Gas Hits New Decade High

Gas prices have suddenly spiked even as oil continues to fall, with natural gas crossing its highest point since 2008.

CME’s e-mini gas futures point to $9.50, up from a recent peak of $9.30 in June. Prices then fell to $5.40, but have since marched upwards, disrupting the stocks and crypto green.

It’s unclear what has caused this recent spike, though gas prices have been gradually rising throughout much of summer from their July low.

Russia is of course claiming gas prices will double, but Germany is fairly close to replacing all dependence on Russian gas with a deal just signed for two floating LNG terminals that are expected to start operations this winter.

That will account for 13% of Germany’s total energy demand, which translates to it being sufficient to replace about 20% of Russian gas.

The problem is that though now there’s the capacity, there isn’t quite the gas with attention currently focused very much on Qatar, rather than Russia.

Qatar just signed a deal for four new LNG ships to be built by South Korea. A new discovery in their fields shared with Iran means the gas production of Qatar, already the world’s biggest exporter, will increase by 40%.

So why isn’t all this making its way to Europe? Well, Germany and Qatar have been negotiation for months now largely off the headlines.

They even signed an energy partnership agreement in May, but talks keep going on. From what little is know, there’s differences about the two decade long terms of the contract and about pricing with Qatar wanting to link the gas price to oil, while Germany tells its companies to find the cheapest deal.

Meanwhile blackouts in Kosovo were narrowly dodged by Albania, but Europe’s winter reserves are filled at 75%, faster than usual.

A  breakthrough in talks with Qatar should start bringing gas prices more in line with normal levels, but for now it remains to be seen whether a double top is in sight.

That’s especially as oil also spiked twice before gradually falling, with speculation potentially playing a significant role in overshooting.

For today however both stocks and crypto are down as markets once again turn their attention to this surprise rise in gas prices.