Global Energy Crisis - Oil to 3 year high

okay good morning everybody welcome it's uh just got eight o'clock on the 28th of september and if you're in the uk at least and perhaps elsewhere in europe now i'd be interested to hear from you guys drop some comments in the chat if you're from different countries are you also getting these kind of notices at petrol stations um big queues well i live in london and um the queues into some of the petrol stations have just been crazy it's made an absolute nightmare of traffic uh situation um but this is a big topic of conversation so this will be one of the key themes that i'm going to cover in this morning's briefing i also want to talk about you know the oil prices generally uh talk about gas prices we've got a potential energy crisis i mean okay fine it's right in front of our face here in the uk but it's not just a uk thing we've got a potential energy crisis brewing across europe really so i want to have a big focus on that this morning in the briefing and then i also want to talk about the debt ceiling that's the u.s debt ceiling and as that kind of remains unresolved just talk about well hang on what is the debt ceiling uh what are the risks and you know will these u.s politicians sort it out or not but before we kind of get into all of that let's have a look at yesterday's heat map so this is looking at u.s stocks and looking at how the market session fared and as you can see here on the tech sector we've got some big red blocks uh microsoft um the top left there down but also most of those texts stocks uh losing ground including google and amazon and the like tesla perhaps bucking that trend up just over two percent now one of the quadrants you perhaps wanna i've noticed mostly in terms of its kind of fluorescent green is the oil and gas kind of energy sector down here which of course is benefiting hugely from what is you know record high gas prices and you know a sharp uptick well for oil we're up at three year highs at the moment and so let's kind of have a quick look at the charts because what's happening this morning as we move into the kind of european session top left we've got stocks here and this is the s p as you can see we're just kind of moving to the downside just this morning we just made a new low for the session but you know yesterday you know looking across over the last week we're kind of still up around the range that we've been in for the last let's say few trading days just shy of the kind of all-time highs if i just move that chart setting to a daily then you can see that you know we're off those highs that we have back at the start of september but i'd say this morning in in europe you know mild you know fairly neutral what happened overnight well the evergrand saga in china chugs on they obviously failed to make that um bond interest payment that dollar bond interest payment on friday but as i said in our podcast that doesn't mean a default yet they've got a 30-day grace period so that that that that kind of story is going to rumble on for the next 30 days in the meantime what helped to kind of just stabilize markets in asia what helped to kind of just stabilize sensor and also if you like is the people's bank of china we're at it again pumping another 100 billion yuan into the you know the short term overnight lending markets to make sure that bank and liquidity is is strong enough to enable the functioning of the day-to-day economic system so we're kind of moving into the european session obviously we've gone through that german election over the weekend and again as i said yesterday um really we'll see that's a months-long story as now the you know schultz tries to form a coalition and at the moment markets are fairly happy with that i mean either way if you get the jamaican or if you get the traffic light coalition either way it's not too far off um the kind of sort of government that we had under merkel so we're not expecting major change there so it's not a huge risk but something to monitor in the months to come dollar strength if we have a look across at the euro dollar chart then what we're getting this morning is we've had another push to the downside so we've broken below that 117 handle that was key support in yesterday's session you can see a nice little trend here as this thing is stepping down if we just uh go to a daily time frame then you can see that we've made new lows for the month this morning because yesterday's session we hit lowe's but it was testing those key that key double bottom from last week well we're down through that 117 handle and so for sure now the next kind of marker in the sand is this level that we're um eyeing up which is the low in august down at 1 16 68 if we go a little bit further back still on a weekly time frame then you can see that these are really key levels because just around you know down around that 116 handle you know major kind of key supports that we had at the back end of last year so the quarter four low was at 116 um so certainly some dollar strength um kind of just feeding through here and your euro weakness we'll talk because the guards obviously um got a major speech today so that's something to keep an eye out for if you're trading things like the euro come down and have a look at buns buns are lower um again this morning um if we just go to a daily time frame to get this into broader context you know we've had some pretty steep downside for buns and that's because yields have been driven higher and yields are driving higher as we know because we're you know well we got an inflation situation which is being exacerbated by what i'm going to talk about in a minute which is that energy crisis pushing energy prices higher which is of course inflationary and then we're thinking right what are central banks going to have to do about that in terms of turning a bit more hawkish more quickly this is helping to kind of drive bond yields higher and of course bond price is moving to the downside as a result if you check ust notes is pretty much the same story again if i go out to a daily chart for context you know we've had a pretty steep move to the downside here over the last few sessions and that's a key break out of this platform we were sat on through the summer so certainly one of the big stories this week and indeed back in the last week is yields properly starting to move to the upside as we start to consider this inflation situation and and whether it is transitory and maybe that that inflation um push to the upside might last longer than we had previously anticipated but one big focus i want to start with here in the briefing is oil and if we i might just actually bring this up and make it a little bit bigger so you guys can properly get into this i mean this is a big sustained move this is just a 60 minute chart just looking back over the last couple of weeks or so this is wti crude okay if i go to a daily then what's really important for this market is this massive level that you can see right here which was the july high at 77 bucks and we're just shy of that today so we we're now above 76. um for for for brent crude um brent's up above 80 um 80 bucks and that actually is the three-year high for brent i was talking about this yesterday with wti if we go back all the way back i mean if we get above this 77 handle that i just drew in because as i was touching on and eluding in the briefing yesterday it's not just this summer's high it's also the key top from back all the way back in october 2018 so massive level for wti crew traders 77 any move above that then for sure you can hang your hat on a move to test that 80 handle i would have thought and at the moment um it does look like um pressures are on the upside and will remain on the upside so let's let's kind of have a little bit of a look at what's going on then if i kind of flick back to my other shop we obviously got a big no just step away from from oil prices for a second because one of the reasons for oil prices being on the upside is actually what's going on over in the gas market um gas prices as you can see on this chart have kind of trebled in europe um in in the last sort of 12 months or so and this has led to record high electricity prices and of course as gas prices are moving higher of course that kind of shifts people's kind of energy dynamic more towards oil rather than gas which is helping to push up oil demand which is helping to push up oil prices but we've got yeah why i mean why are gas prices moving to the upside in such a dramatic fashion well we've got a global kind of shortage in on the production side so production is definitely lower um but then one of the reasons for that is there's particularly for europe because this gas price spike is certainly uh being felt in europe more than anywhere else and there's less supply uh and that's because we had a cold winter so it was more demand over the last winter and countries haven't replenished their story gas storage facilities so there's a now an over demand for gas but just at that moment in time there's less gas coming from russia so europe's incredibly dependent on russian gas and russia are just holding back on pumping more and there's speculation as to why that might be i mean there's kind of two sides to the fence if you're um you know giving russia the benefit of the doubt then you're saying that well russia are just replenishing their own supplies after a kind of heavy drawdown over the last winter and so there's less gas available for export that's that's kind of on that side but if you're a bit more kind of skeptical about the russian um you know foreign policy angle then people are saying well they're holding off on pumping gas to europe to put pressure on europe to sign off on the nord stream ii gas pipeline which is a very controversial new big pipeline that putin has got planned um you know to come out of russia and supply even more of um you know europe's gas the other thing that's been happening over the longer term and it's kind of lots of things coming to a head here but over the longer term europe has been phasing out the use of coal um this is part of that kind of green initiative to move to a more cleaner fuels also particularly in the uk and why is it a massive problem in the uk you'd probably say you the uk is more vulnerable than the rest of europe a couple of reasons the uk are at the end of the russian pipeline the russian pipeline comes through continental europe you know deliveries all along the way and then we're at the end of that line and therefore we're perhaps more at risk to that russian shortfall in production but also the uk is more dependent on greener energy and particularly on wind and as irony would have it just as we're having all of this production and these demand issues as irony would have it we've been through one of the lowest wind phases for for years so wind levels have dropped dramatically over the last three to four weeks which has led to the output of you know wind power generation being sharply lower now normally that's backstopped by gas but of course gas prices have tripled um and and so here's your problem it's not such a problem over in the us and in fact over in the u.s they're trying to take advantage of this they're hoping that europe won't sign off on this nordstream 2 because the u.s want to export more gas and this is the amount of gas they're pumping so the u.s gas exports are on the up and they're looking to try and take advantage of this so plenty of investment going in on the u.s side so it's quite an interesting sort of geopolitical sort of battle going on here as to who's going to win europe's demand will it be russia with nordstrom 2 can biden's kind of administration get going on on on gearing up they need more infrastructure on the exporting side that's the problem and that takes quite a long time so it'll be an interesting battle over over the coming years um but this is also kind of coming to a head i mean obviously this petrol station thing i started the briefing with this image it's got nothing well there's partly to do with gas insomuch as people are using less gas because prices are too high so they're the the demand for petrol has gone up which has led to a shortage well is there a shortage is there not i mean one of the key problems here in the uk is there's a shortage not of not of oil there's a shortage of hgv drivers but where did this kind of panic buying come from well um bp had a kind of what was supposed to be a behind closed doors private meeting with the government and in that meeting they suggested that their forecourts were about two-thirds of um normal stock levels so they're they're down on the normal stock levels that they require for smooth operation and the reason they're down there's no shortage of oil the reason that four core stock levels are down is because there aren't enough h3 hgv drivers in the last 12 months hgv drivers in britain has dropped from 305 000 drivers to 235 000 drivers we've got 70 000 less this is partly due to brexit and this is also due to covid and travel restrictions a lot of these foreign um hgv drivers operating in britain have gone back home and can't get back or don't want to come back and so we've got a major shortage and there's obviously emergency policies that are trying to get put in place with now the military on standby and the military looking to get extra training to step in to take up the shortfall they're also working on the visa side to get more drivers into the country but in the meantime of course you know four courts are you know massive queues coming out of four courts and four courts are starting to run out over in over the weekend in london there was six times the normal demand for petrol than you would normally see at a weekend on a weekend in september so also i've been outside of britain and outside of of the kind of the the uk more broadly you know other reasons why oil prices are on the up and if i just go back to the perhaps the daily chart to kind of get this into context you know why are oil prices on the up well you know we've got a prolonged shortage of production out of the gulf of mexico you know further hangovers from hurricane ida obviously demand is now rising also just because of the fact that lockdown travel restrictions are being lifted um to that that's that's being seen by looking at u.s inventory levels which are actually well below average levels and the problem here is we've got inventory levels really low just before we're about to enter into the year-end peak consumption period as a result of all of this you've got the likes of goldman's that are now predicting 90 bucks for year end for w for wti crew i'm going to go back to the weekly chart i'm going to go to a monthly chart just to show you where 90 bucks falls because where if we do break 77 if if massive because actually now i go back on the longer term chart you had key support around that 77 dollar handle for example it was the 2012 low um also kind of a triple bottom in 2011 i i can't explain how big a level 77 is to you if you get a move above there you're surely going to get some technical breakouts goldman's had originally had 80 bucks as their year-end target they've gone now to 90 and from a technical point of view fine i guess you got a little bit of support here coming from the start of 2014 but the point is there's just not much in the way there's real clear air here in terms of technical resistance on the upside so interesting stuff to add to all of this let's talk about china which are a huge consumer of energy generally in oil but china are also exacerbating these issues because they're going through um obviously a pollution crackdown which is leading from a move away from things like coal and another problem with the coal part is that coal prices in china have jumped 96 this year so uh you know factories and industry are trying to move away from coal anyway because it's too expensive that's putting more demand on on gas and oil which is exacerbating this energy crisis why are they doing this now well beijing you know they're hosting the winter olympics in february and historically any kind of major international events at large uh chinese cities has led to a you know pre-event crackdown um in in pollution so that when the event happens then the pollution levels are nice and low for you know international media and international visits china because of this issue have also been tapping into their state petroleum reserves as well by the way but you know you're getting an energy crisis in china to the point where there's actually been homes left with no power in northeastern china so you know this energy crisis is happening it's not just in britain it's not just in europe it's you know china are having issues as well so this is all feeding through into this kind of oil price situation and something definitely to carry on monitoring it has implications for central banks because of the inflationary aspect it'll be really interesting to see if legard touches on the energy price crisis in her sintra opening remarks that'll be at one o'clock today so this is certainly the hot topic and pushed things like evergrand off the uh the kind of front pages if you like the other thing to kind of just touch on then that i wanted to just briefly talk about uh was the us debt ceiling what is this u.s debt ceiling and you're going to hear a lot more about it in the coming days the debt ceiling it's a legal cap that congress sets on the amount that the treasury can borrow okay so it's a borrowing cap and obviously a borrowing cap leads to a spending cap so what is this this debt ceiling's been in place you know as a legal caps actually since 1917 but what happens is periodically um the way it works is the us government normally work on an annual cycle where they'll set the budget for the next year okay and of course that budget is the amount they're going to spend and the amount they're going to spend that dictates the amount they're going to have to borrow to spend that and right how much do they need to borrow and okay will that new amount of borrowing lead to a breaking above the current cap on the debt ceiling normally it's a yes it is going to break above the current cap on the debt ceiling right so it's into congress to try and then raise a bill um to raise that debt ceiling to accommodate this new spending and then therefore this new borrowing and this is a cycle that happens normally annually but in 2019 they actually set in place a two-year spending budget and that came to an end in july all right so that budget that they that congress agreed on in 2019 has come to it it's expired so here we are now left with the budgeting for 2022 and therefore the need to raise the debt ceiling in order to afford it okay historically the problem in america is this becomes a massive political battle you know each time this debt ceiling bill gets raised huge political battle between what is a very kind of polarized political environment in the us with the democrats and the republicans obviously biden and the democrats have kind of in control at this point and the democrats are definitely keen to spend more they're happy to raise the debt ceiling the republicans are anti-big government anti-spending anti of raising the debt ceiling so here we have this kind of standoff what's going to happen is the problem is if the politicians can't agree then actually what happens is the government shuts down this last happened major time was last in 2012 where the government actually closed for like three or four weeks and they close because they don't have any money to pay stuff and i don't just mean politicians here and here's here becomes the problem can this become an economic issue well in the short term it can become a small one where the government's unable to pay not only its own staff but they're unable to pay public sector workers they're unable to pay soldiers that they're unable to pay state pensions they're unable to pay child well welfare all right so it kind of prevents a lot of payments going out into the system without those payments going out into the system these people that receive the payments can't consume so it can have a short-term impact for sure um the ultra nightmare scenario is the government don't agree and what happens in that event is the government defaults on its debt now yes that is an alarming sentence if the government of the us defaulted on their debt we would have the monster of all global financial crises like no one's ever seen in our lifetimes okay which is why it won't happen so it okay it'll be a congress pitch battle but in the end they'll agree and we of course the u.s won't default it's just how long will it take them to agree how long will the u.s government be shut down for i mean days weeks here and therefore how much of a negative impact might it have but in the end on the other side of the agreement and things reopening um you'll see a bounce back and there won't be a sustained economic impact but it'll be on people's radars and you're going to hear more about this in the press over the coming days and weeks okay so i thought i'd just bring it up right just to finish very quickly what's on the slate for the data set this morning um interestingly given everything oil related we've got opec world all outlook that's it that's um that's at 1 30 p.m that's a key one of course um to keep your your ears and eyes on uh we've got u.s consumer confidence figures at 3 p.m they're the kind of big data points but definitely the the cat well you've got api inventory overnight as well by the way as we then feed into the department of energy numbers tomorrow so that'll be at 9 30 tonight but definitely the the kind of big headline event for today it starts at 1 o'clock it's the ecb's monetary policy conference with legard kicking it off at one with some with some comments okay and her title for her speech beyond the pandemic the future of monetary policy she'll be giving us an economic update we want to hear her views on the energy crisis when are they going to wind down their pep which is that pandemic emergency purchase program and what does that mean for the the the asset purchase program and what it was so concerns about inflation and so on so that'll be the big event you can see there's huge number of a bank sorry monetary policy speakers through the day including big guns like uh powell for example um and he's speaking actually in the u.s senate committee so nothing to do with cintra although he is involved with the cintra conference tomorrow so keep your eye on powell that's at three o'clock um bullard's talking later on as well so hugely um and then yellen talking later on tonight and that'll be key she might be talking about the debt ceiling so keep your arm out for that so plenty of speakers to keep you on your toes okay guys that's it for the briefing have a good session

Channel: AmplifyME

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Keywords: Amplify Trading, AmplifyME, macro update, fx news, stocks news, commodity trading, stock trading, energy price crisis, gas price spike, crude oil 3 year high, crude oil, petrol shortage, US debt ceiling, yanet yellen, christine lagarde

Id: DT3suS-T890

Length: 23min 59sec (1439 seconds)

Published: Tue Sep 28 2021