RE: SP19 Dec 2022 15:54
“ Can I ask your opinion re price of Nat gas down c. 8% today and DEC SP up 1.5%. “
Here you go pretty much all these items discussed here. Pipeline, weather, international trade.
“US natural gas futures fell further to $6.2/MMBtu in the third week of December, moving toward a 5-month low of $5.5/MMBtu hit on December 6th, amid forecasts of milder weather and lower heating demand in late December. Last week, the commodity gained more than 5%, amid signs of robust foreign demand and a drop in domestic output. Recent data showed that natural gas flowing towards US LNG terminals rose to 13 bcf per day on Thursday, the most since June, pointing to firm international demand. At the same time, extreme cold from North Dakota to Texas resulted in the freeze of oil and gas wells, lowering production. Meanwhile, the Freeport LNG export plant in Texas, forced to go offline in June following a fire, expects to bring operations back online only by year's end, leaving more supply on the domestic market.”
https://tradingeconomics.com/commodity/natural-gas
Dec Sp isn’t entirely disconnected from gas prices but they make good returns between 5 and 7.
As I posted before they were tracking the energy majors but split away early October. I don’t know why can only guess as per earlier post.
The hedging imo creates a wider SP trading bandwidth as opposed to Dec tracking every tick up or down in gas prices.
“If so, what do you think is the catalyst for SP moves; the FTSE, for example?”
The input unit costs can have a bigger impact on the balance sheet. That will be inflation driven. See earlier posts.
So DEC have taken on more crews. They will need pay increases and sector inflation is probably higher end. So things like pumps, cement, fluid etc are more expensive. When you play that off against the hedging for illustrations sake assume that results in fixed cashflow inflation driven costs now net out as a lower FcF on the balance sheet by 11%.
Obviously it’s not as simple as that as you have to factor in volumes as well but inflationary pressures will have an impact but NOT interest rates on payments as our debt is fixed but we do benefit on cash in account.
FTSE moving up is interesting as it’s been sector driven so energy can go up say but service sector could go down but at the end of the day a positive macro tide should raise all or rathe most ships!
Hope that helps.
Usual caveats
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