The bailout style of assistance, where excess profits of energy companies will be shaved off and distributed to consumers, seemed to do the trick, though perhaps only in the short term. Meanwhile, investment analyst Andreas Steno Larsen took to Twitter on October 5 to explain why he shorted oil and gas when prices peaked in September. Larsen pointed to the fact that skyrocketing prices in electricity did not reflect the fundamentals, equating it to what occurred to LIBOR during the 2008 crisis.
Gas market
According to Larsen, the European Union’s request to its member states to fill up their gas reserves could have potentially aided the run-up seen in gas prices. Now that most of the countries, except Hungary, managed to stock up roughly 80% of their natural gas capacity, the price action is reversing. A similar sentiment was heard by Goldman Sachs (NYSE: GS) analysts, who claimed back in September that gas prices will most likely halve during wintertime as Europe managed to find a solution to the gas inventory buildup puzzle.
Potential reversal
Yet, there is a potential for a reversal in gas price come wintertime when the heating season begins. This will, of course, be highly dependent on the severity of the cold period and the actual utilization of gas reserves. Still, if history is any guide, use will deplete reserves, and a new buying cycle will begin. Larsen concluded that due to a complete lack of supply from Russia, the battle on the gas market would initially increase gas prices, which will, in turn, increase energy prices, perhaps as early as November. Buy stocks now with Interactive Brokers – the most advanced investment platform Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
