Norway's oil and gas sector is on strike. Workers are demanding pay rises due to rising inflation. Initially, it was estimated that gas production could fall by 25%, while oil production could decrease by 15%. The reality could turn out to be even worse. The association of oil and gas producers in Norway reports that oil production has fallen by 341,000 bpd since Saturday, while gas exports have decreased by 56%. Norway is currently one of the largest gas suppliers to Europe, given the sharp decline in gas exports from Russia and still limited exports from the US to Europe (the US overtook Russia as the 1st supplier, but the recent closure of the Freeport terminal may again lead to a reshuffle).
How is the market reacting? The decline in oil production is sizable, and oil prices are falling, even as Saudi Arabia raised export prices. US gas prices are not shifting their course as well, as stockpiles are filling up at slightly faster pace.
Start investing today or test a free demo
Create account Try a demo Download mobile app Download mobile appGas prices on the Dutch stock exchange are much more responsive, where the MWh price reached €170.00. However, prices may continue to rise, given the sharp decline in exports from Russia (some even expect complete suspension of exports). Poland seems to be safe for the winter period, as the warehouses are 90% filled (usually this level was recorded at the turn of October and November). The situation is worse in other Western European countries, in particular Germany, where the warehouses are about 50% full (it is worth remembering, however, that warehouses in Germany are about 5-6 times larger than in Poland). What else is worth knowing?
-
Norway supplies as much as 13% of the daily gas flow to Europe
-
Norway is the main gas supplier to the UK, which puts even more pressure on the UK economy
-
Gazprom cut 60% of gas transfer to Western Europe via Nordstream I, full shutdown of the pipeline is planned next week due to "maintenance" reasons
-
However, the question is whether Russia will resume transfers,as it earns record amounts of money from oil. Russia earns a fortune and produces more than it did before the invasion (though still below its all-time high)
-
The gas price in Europe currently stands at € 170.00 / MWh, which equates to $ 50 MMBTU. However, the United States is unable to supply more gas to Europe due to limited export capabilities and the need to rebuild its own stockpiles
Gas prices in the US are nearly 10 times lower compared to Europe! Source: Bloomberg
Gas transfer to Western Europe via Gazprom has decreased by 60% and maintenance work is underway, which may further limit exports. However, Russia does not need to resume gas transfers, which would be disastrous for the economy of Germany and the whole of Europe. Source: Bloomberg
The content of this report has been created by XTB S.A., with its registered office in Warsaw, at Prosta 67, 00-838 Warsaw, Poland, (KRS number 0000217580) and supervised by Polish Supervision Authority ( No. DDM-M-4021-57-1/2005). This material is a marketing communication within the meaning of Art. 24 (3) of Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU (MiFID II). Marketing communication is not an investment recommendation or information recommending or suggesting an investment strategy within the meaning of Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC and Commission Delegated Regulation (EU) 2016/958 of 9 March 2016 supplementing Regulation (EU) No 596/2014 of the European Parliament and of the Council with regard to regulatory technical standards for the technical arrangements for objective presentation of investment recommendations or other information recommending or suggesting an investment strategy and for disclosure of particular interests or indications of conflicts of interest or any other advice, including in the area of investment advisory, within the meaning of the Trading in Financial Instruments Act of 29 July 2005 (i.e. Journal of Laws 2019, item 875, as amended). The marketing communication is prepared with the highest diligence, objectivity, presents the facts known to the author on the date of preparation and is devoid of any evaluation elements. The marketing communication is prepared without considering the client’s needs, his individual financial situation and does not present any investment strategy in any way. The marketing communication does not constitute an offer of sale, offering, subscription, invitation to purchase, advertisement or promotion of any financial instruments. XTB S.A. is not liable for any client’s actions or omissions, in particular for the acquisition or disposal of financial instruments, undertaken on the basis of the information contained in this marketing communication. In the event that the marketing communication contains any information about any results regarding the financial instruments indicated therein, these do not constitute any guarantee or forecast regarding the future results.
