Just when I think I have figured something out... it goes "poof"!
A bit over a week ago, the price of natural gas in Europe and U.K. went skyward, Mostly because Gazprom was shutting down Nord Stream 1 for repairs and might not reopen.
On the 26th of August, Norway's Gassco, stated they will reduce capacity for planned and unplanned maintenance at 13 fields and processing plants throughout September.
This past week saw prices drop 30%. Reasons given...
- It was thought Nord Stream 1 would reopen on schedule.
- Germany was a month ahead of meeting its storage capacity targets.
- It was suggested that certain large industrial users of natural gas could not afford the high price and were shutting down.
- It was further suggested, these companies were selling some of that much cheaper natural gas "forward contracted" a couple of years back... for a healthy profit margin going forward.
Then late Friday, Gazprom said no on reopening on schedule, just like everyone originally thought.
So #1 was wrong, #2 is probably right. How can #2 continue on pace to achieve all its targets, if Nord Stream 1 remains shuttered and Norway starts their planned and unplanned maintenance? Unless there is much to #3 and #4.
Let's face it... if you were a company that heavily uses natural gas; you would want to plan several years ahead and lock in prices. Say it is mid 2019 and you lock in a 10€ per MWh and you have that currently locked into your business model, but your business model suggests a dramatic slowdown in your sales... you could look back at that 10€ per MWh and see the market is currently paying 20 times that rate.
Call me quite cynical, but when such a company screams they cannot afford such high natural gas prices and then shut down, I wonder what the real motivation might be.
This becomes especially true, when considering some of these countries are multi-national conglomerates.
Am I over thinking?
