US Natural gas futures slip – is the honeymoon over?

With US natural gas futures on a downward trend, we ask is time up for high gas prices?

Natural gas trading

Natural gas futures start the week in the red

What a couple of weeks it’s been for the Henry Hub natural gas contract.

It seems only yesterday that we were talking about natural gas reaching all-time highs. It’s certainly true that wholesale commodity prices in Europe and Asia are still exceptionally high.

While oil continues to rise, gas looks like it’s on the decline. But in terms of the US, which Henry Hub focuses on, we’re asking is the honeymoon over?

Prices were firmly in the red on Monday. Starting the day at around $5.20, Henry Hub futures dropped to $4.90 at their lowest. As of Tuesday morning, prices had climbed back into the green, before slipping down to the $4.90 level.

Why the slump? There are a couple of factors at play.

First up, there is the weather. Mild to seasonal high temperatures across much of the US is capping off demand.

Natural Gas Weather states: “One weather system will bring showers to New England, while a second system tracks through the Mtn West w/rain and snow, but both mild w/highs of 40s to 60s. The rest of the US will be nice w/highs of 60s to 80s for very light national demand.

“The system currently over the Mtn. West will track across the Great Lakes and Northeast this weekend w/highs of 40-60s, lows 20s-40s for a modest bump in national demand.

“For next week, weather systems will bring rain and snow to the West, while very nice over the eastern 2/3 of the US. Overall, national demand will be LOW through Friday, then MODERATE this coming weekend.”

Basically, not a lot of need for gas heating in key consumption areas of the US.

However, we have seen a slight bump in gas consumption. For the week ending October 8th, US consumption increased 1.3% week-on-week.

We’re also in injection season: the time of year when the US looks to build stockpiles in line with colder winter temperatures.

The EIA forecasts that US natural gas inventories ended September 2021 at about 3.3 trillion cubic feet 5% less than the five-year average for this time of year. Injections into storage this summer have been below the previous five-year average.

This was down to a combination of hot summer temperatures leading to more electricity use for cooling purposes and increased exports. Despite this, domestic production has remained fairly flat across the year. A sizeable chunk of US production infrastructure was shuttered earlier in the year due to Hurricane Ida.

The latest EIA data ahead of Thursday’s release shows total stocks standing at stood at 3.369 Tcf for the week ending October 8th – down 501 Bcf from a year ago and 174 Bcf below the five-year average once again.

Gazprom to the rescue?

Switching to European markets, Gazprom might be following the lead of President Putin (read: orders of President Putin) by stepping up production capacity for its long-term gas deals.

“Of course, if Russia’s European partners increase orders and if the volumes in long-term contracts grow, I think that Gazprom will surely develop its production capacity,” Deputy Prime Minister Alexander Novak said in an interview during last week’s Russian Energy Week summit.

This is pipeline all part of pipeline politics. Russia has been accused of gas market manipulation in an effort to force the EU into accepting the Nord Stream 2 pipeline. Never mind that this is pretty much a necessity for Germany’s energy needs, but the bloc has long been basically hostile towards Russia.

But as the European gas crisis rolls on it seems the deck is stacked fairly heavily in Gazprom and Russia’s favour. They’re the ones with the gas. They’re the ones with the export infrastructure. They’re the ones with more customers than just Europe.

Unless Europe picks up more gas from America or Qatar, then it’s likely to remain reliant on Russian products for the foreseeable future.

Where can oil go from here?

With crude oil prices strengthening, markets are asking just how high oil can climb right now.

Oil trading

Crude starts the week on a strong footing

Two key oil benchmarks began this week in a strong position.

WTI was flitting between $81.50 to $82.28 between Monday and Tuesday, even reaching $83.17 on Monday.

Brent is closing in on all-time highs. Trading at around $84.80 at the time of writing, its only a couple of percentage points away from its October 2018 high of $86.

All good news if you’re an oil bear.

So, what’s supporting prices this week? It’s the old supply and demand struggle.

Saudi Arabia helped stoke the fires a little with its refusal to open the OPEC+ taps further. The kingdom and OPEC chief said last week it and the cartel were committed to their monthly production boosts.

Each month until at least April next year, OPEC members will be collectively upping production by 400,000 bpd.

Rapidly rising natural gas and coal prices could also benefit oil. As winter rolls in, and temperatures drop, the high costs from those two commodities could necessitate a switch to oil heating. Crude oil’s already a high-demand product as it is. Supplies are also being kept tight, at least from OPEC+.

The conditions are there for a sustained rally – but we have to be careful of market exhaustion. Support levels identified for WTI and Brent have been variously stated at $75 and $80 respectively by oil analysts.

But some market observers are much more optimistic…

Billionaire businessman suggests $100 oil price is on the way

United Refining Company Chief Executive John Catsimatidis has said he believes crude oil can hit $100 this year.

“With oil nearly at $84 this morning, we are going to see $100 oil, it looks like, there’s no sign of it stopping,” Catsimatidis said in an interview with Fox Business on Monday.

The billionaire cited inflation and rising energy costs across the board as reasons why crude might break the $100 barrier.

Catsimatidis’ comments mirror those of another big oil player: Russian President Vladimir Putin.

When quizzed by a CNBC journalist during the Russian Energy Week summit last Wednesday, Russia’s leader said $100 is “quite possible”.

However, Putin toed a cautious line saying: “Russia and our partners and OPEC + group, I would say we are doing everything possible to make sure the oil market stabilizes.

“We are trying not to allow any shock peaks in prices. We certainly do not want to have that — it is not in our interests.”

It kind of is in Russia’s interest to have a high oil price. 40% of government revenue stem from hydrocarbons, but right now it appears Russia is more concerned with playing.

More US shale oil on the way?

Shale oil could spoil OPEC+’s party.

More US rigs in the Permian Basin are coming online. As it stands, the rig count is 136 rigs higher in this prime shale geography than this time last year.

Analysts believe Permian infrastructure could end up pumping out 4.9m bpd of crude by early 2022. Some are even expecting it to hit this number this month.

OPEC estimates suggest the US will add 800,000 bpd to production via shale sources next year. The EIA figure is roughly 700,000 bpd. Plenty of black gold to help calm the Biden White House’s supply jitters.

Biden and co. have been calling for OPEC and oil producers to step up their production as gasoline prices rise in the US. However, OPEC is not budging as mentioned above. I mean, if you do insist on outfitting regular cars with thirsty V8 motors, you will pay the gasoline cost. Did America not learn anything from the 70s energy crisis?

US drillers are being advised not to chase high oil prices though at the risk of drilling themselves into oblivion.

Looking at storage US commercial inventories rose 6.1m bpd according to the EIA stockpile report for the week ending October 8th. At 427.0 million barrels, U.S. crude oil inventories are about 6% below the five year average for this time of year.

Cryptocurrency update: Bitcoin eyes new all-time high on ETF boost

Bitcoin sets its sights on fresh all-time highs after getting ETF-shaped support this morning.

Cryptocurrency update

Bitcoin bounces as SEC gives crypto ETFs the green light

We spoke on Friday about the US Securities and Exchange Commission not being opposed to the idea of crypto ETFs.

Well, the SEC lived up to its word by okaying the introduction of cryptocurrency exchange traded funds on Friday.

Initially, BTC retreated to about $59,000 on the news, but Monday morning bought better price action. Bitcoin reached over $62,600 – its highest level for over 6 months – before finding a home more around the $61,100 mark.

Bitcoin has had a torrid time since peaking in April 2021. The volatility rollercoaster keeps on rollin’. But with the introduction of ETFs to the digital token trading sphere, the sector has been opened up wider. Can this stabilise prices? Maybe. It’s certainly possible that we’ll see a new all-time for Bitcoin as soon as the first exchange traded fund goes live.

Proponents of digital token ETFs reckon this is a good chance for traders and investors looking to enter crypto land to do so without needing to own any underlying assets. Plus, exchange traded funds by their very nature have to be regulated. That might attract those who are put off by crypto’s almost Wild West vibes.

ProShares Bitcoin ETF to start trading in 3,2,1…

It’s thought that ProShares’ Bitcoin ETF will be the first fund to start trading.

ProShares has said its newest fund will be available for trading on Tuesday.

The ProShares Bitcoin Strategy ETF, which will give exposure to bitcoin futures contracts but not the spot market, will trade under the BITO ticker.

NYSE Arca certified the fund’s approval for listing on Friday afternoon, around the time the SEC was mulling over approving such funds.

Let’s be clear: the SEC hasn’t actually given an explicit, formal declaration of crypto ETF approval. It may never give one. However, it’s clear to see that, with the upcoming launch of ProShares’ fund, that they’re fine.

So, brace for a bit of a deluge of digital token-tracking futures funds soon. Roughly 40 are alleged to be in the approval process.

Why the futures focus? According to SEC Chair Gary Gensler, futures-based products may be able to offer stronger investor and trader protections under current legislation.

As we know, there is little to no regulation in pure token trading right now. It is on the US’ agenda. For now, however, exchange traded funds may present a potentially “safer” option to traders. They are still pegged to crypto token prices though. I would expect to see some of that volatility spill into ETF performance.

Grayscale close to Bitcoin exchange traded fund filing

This week may see another big hitter punching its way into the new Bitcoin ETF frontier.

Reports suggest Greyscale is planning to convert its $38.7bn Bitcoin Trust (GCBT) into an ETF. It could make its application early this week.

This would be an interesting move. Greyscale is the world’s largest digital asset manager and the GCBT is also the largest trust of its kind in the world.

Where Greyscale’s plans differ to, say, ProShares is that the Trust is not linked to derivatives. It is composed of digital BTC tokens. Its ETF would do the same. That might throw up regulatory roadblocks during the approval process.

Based on the fact Greyscale’s proposed ETF would NOT be futures or derivatives based, some analysts believe there’s little chance of it gaining approval.

Once Greyscale makes its filing, authorities have 75-days to review it.

Can crude oil prices make it to the triple digits this year?

Oil prices are mounting a strong upward charge as the natural gas crisis rolls on. The question is how far can oil go?

Oil trading

A combination of factors sent oil prices skyward over the weekend. It essentially boils down to the state of inventories, supplies being kept in check, and demand recovering from the summer’s Delta variant COVID-19 wave.

Then you can factor in the global natural gas shortage. A big part of the support crude prices are getting comes from the gas crisis in the form of fuel-switching – or at least the idea of increased fuel switching.

Oil bulls believe that Europe and Asia could pick up more oil for their power demands this winter to compensate for tighter gas supplies. More oil use = more oil demand = oil prices.

“An acceleration in gas-to-oil switching could boost crude oil demand used to generate power this coming northern hemisphere winter,” ANZ commodities analysts said in a note published earlier in the week.

If this does occur, despite Russian President Putin saying he would step in and increase gas supplies to Europe, then fuel switching could be the catalyst that sends oil prices into three-figure territory.

However, JPMorgan analysts have said they’ve yet to see any evidence of a major oil-to-gas fuel change just yet.

A note from the investment bank said: “This means that our estimate of 750,000 barrels per day of gas-to-oil switching demand under normal winter conditions could be significantly overstated.»

So, under present circumstances, the market appears to be pricing in this shift, but it might not actually occur.

Crude prices were on a strong footing at the start of the week. As of Tuesday morning, WTI futures were trading for around $80.5.

Brent crude futures are exchanging hands for $83.83.

There was talk last week that the US would be dipping into its strategic reserve, which did cause prices to wobble. However, the Department of Energy has walked back on these claims. If anything, US inventories are going up.

Oil & gas infrastructure in the Gulf of Mexico, previously closed due to Hurricane Ida passing by, is back online. Rig counts are rising week-on-week. That means more US-sourced crude is being pumped into its domestic stockpiles. As such, there is no need to tap the nation’s strategic reserves just yet.

Crude inventories rose by 2.3 million barrels in the week to October 1st to 420.9 million barrels. Analysts were expecting a 418,000 drawdown.

Natural gas trading

The ongoing gas crisis was creating plenty of upside risk at the start of the week. However, it looks like traders were looking at improving US natural gas supplies for this week’s price action.

Warmer temperatures are playing heavily into the US 15-day weather outlook. Cold temperatures are departing from much of the US, and while unseasonable warmth is good for those who want to go out and about, it’s not so great for price action.

October demand could fall to its lowest for over forty years based on prevailing weather forecasts. It’s possible that the demand picture could extend into November too.

However, warm weather will help the injection situation.

The Energy Information Administration (EIA) reported last Thursday that domestic supplies of natural gas rose by 118 billion cubic feet (Bcf) for the week ended October 1st.

S&P Global Platts analysts were expecting a smaller 111 Bcf rise.

There is some way to go before stockpiles are in line with seasonal norms. Total stocks now stand at 3.288 trillion cubic feet (Tcf), down 532 Bcf from a year ago and 176 Bcf below the five-year average.

In terms of price action, Henry Hub futures were trading at $5.79 on Monday morning and looked like they were ready to challenge $5.80.

Prices pulled back to $5.40 across the Monday session leaving. They dropped further, roughly 2%, to $5.20, so last week’s major rally appears to be petering out. Where they go now seems tied in with US weather patterns. There’s still a gas shortage but as mentioned above, the focus is on what’s happening in the USA instead of Europe and Asia.

Vlad to the rescue? Putin steps in to calm nat gas crisis

Vlad to the rescue… Looks like Putin has just come in to call a (temporary) halt to the gas crisis in Europe, finally stepping in with comments that have offered some stability to the market after a tumultuous morning/week.

Putin says:

  • Boosting gas supplies to Europe
  • Ready to stabilise global energy market
  • Gazprom supplies to Europe to reach new record
  • Increasing gas transit via Ukraine & will exceed contractual obligations for gas via Ukraine.

Henry Hub Nat Gas prices were offered on the comments/headlines that Russia is ready to help out. The situation remains difficult of course but could be that Putin has just put a ceiling on these crazy market moves for the time being. There are other factors but a boost in supply from Russia would ease immediate concerns in Europe. Longer-term of course the lack of fossil fuel capex in response to high prices is a big driver of prices staying higher for longer. Winter is coming and supplies are still very short and markets volatile. Plus how long does Putin play nice?

Anyway, it seems to have calmed the market for the time being. One thing you have to take from all this is that Nord Stream 2 is surely going to be approved soon…Merkel stressing in comments just a few minutes ago that it is not yet ready.

Henry Hub prices tumbled off the highs to test $6 again on the news crossing the wires. UK prices have meanwhile completed a heck of a round trip with a daily gain of 40% reduced to 4%. Whilst US nat gas prices are not directly correlated to the situation in Europe we can see that the comments from Putin hit prices as they crossed the wires. Oil was also pulled down on the comments.

Natural gas chart 06.10.2021

Oil surges to seven-year high on OPEC+ decision

OPEC and allies commit to production increases sending prices on a strong upward trajectory.

Oil trading

The week’s big news is the oil price boost afforded by OPEC+’s output increase.

The cartel and its allies met virtually on Monday to discuss the state of play for its production volumes. It unanimously decided to stick with increasing output by 400,000 bpd in line with its tapering plans.

There had been some talk of OPEC+ pushing for an 800,000 bpd increase in November, with no increase to follow in December. That isn’t the case. There is a tricky tightrope to walk for the cartel regarding supply and demand, after all.

Oil jumped on news that more OPEC+ output is coming. WTI, for instance, is trading at seven-year highs with futures at $77.87 and spots at $77.70.

Brent broke above $80 on the news. At the time of writing, Brent crude futures had reached $81.69, gaining 0.48% on the day. Brent spots showed similar on-the-day growth and were trading for $81.47.

On the one hand, OPEC+ has acted to protect prices. Another argument is that there is actually not enough room to grow production further at this stage. While Saudi Arabia and the UAE have increased their export volumes by 1.9m bpd 2021, for instance, other OPEC+ members have actually seen theirs drop.

US President Joe Biden was keen for OPEC+ to expand production even further. Roughly 30m bpd of production has been affected by Hurricane Ida. While the reopening of US shale infrastructure in the Gulf of Mexico is underway, Biden was hoping OPEC+ could plug the gap.

That’s clearly not the case here. Instead, OPEC+ is treading the same cautious path it has been walking for the length of the pandemic.

Baker Hughes reported a rise in rig counts for the fourth consecutive week on Friday. Rigs rose by 7 to 528 in the week ending October 1st – the highest level since April 2020. Many Hurricane Ida-hit facilities are starting to come back online, hence the increase.

Looking to US inventories, we saw a major increase EIA figures in the week ending September 24th. US commercial crude oil inventories increased by 4.6 million barrels from the previous week.

At 418.5 million barrels, US crude oil inventories are about 7% below the five-year average for this time of year.

Natural gas trading

Natural gas dropped on Friday, but as of Monday had started to make strong gains again. At the time of writing, Henry Hub futures were up 4.11%, trading at around $5.77.

The march towards $6.00 is back on.

Supply constraints remain in Europe and the UK and China is apparently hellbent on sucking up every last ounce of LNG it can get its hands on. Even Russia has begun tightening levels heading to Europe. It’s going to be a tricky couple of months in terms of supplies.

Bad for consumers? Most likely. Good for bullish traders? Possibly.

Last week’s EIA storage report triggered a broader sell off with traders feeling bearish.

Working gas in storage was 3,170 Bcf as of Friday, September 24th, 2021, according to EIA estimates. This represents a net increase of 88 Bcf from the previous week. Stocks were 575 Bcf less than last year at this time, and 213 Bcf below the five-year average of 3,383 Bcf.

Price action towards the end of last week indicated the presence of strong short-term sellers.

Looking to weather, in the short-term, US national demand is trending towards very low levels, according to Natural Gas Weather.

The weather service said “A messy pattern continues as numerous weather systems again impact the US this week. One system is over the Northwest, a second tracking into the Southwest mid-week, and a third extending from the Great Lakes to the South and Southeast.”

There are reports of tropical storms and hurricanes swirling over the Atlantic. Should we be looking at another Hurricane Ida, then US infrastructure could be about to take another big hit. Supplies would get even tighter.

Oil & gas stage major surge

Crude oil and natural gas are off to a flying start this week with market conditions perfectly aligning to create strong price action.

Oil trading

It’s been an exceptionally good couple of days for oil prices.

The key WTI and Brent Crude benchmarks are heading in one direction as they carry on the momentum built up over the weekend.

As of Tuesday, WTI had passed $76.33, making 1.1% on the day, and continues on its upward trajectory.

Much can be said of Brent. The North Sea benchmark is aiming to break the $80 level. At the time of writing, Brent futures were trading for around $79.47 after making 1.15%.

Why the rally and why now? It’s a combination of tighter global supplies, trader confidence, and strong American Petroleum Institute (API) numbers. The three together have created a perfect price storm, hence the strong price action we’re currently seeing.

Firstly, it looks like energy markets are the place to be right now for traders. They appear to be pushing these new highs and are confident in the market’s overall strength.

The API’s inventories report from last week helped underpin this market confidence too. The US has long been a bellwether for oil demand – it is the world’s largest consumer after all – which makes numbers from the API or EIA particularly useful.

The API reported a 6.108m barrel drawdown for the week ending September 17th. Market estimates forecasted a decline of 2.4m.

As the US economy opens up, energy-intensive industries are starting to roar back to life, hence the higher-than-expected drawdown. It’s much the same story in developed economies worldwide as they look to return to post-pandemic normality.

As winter heating season approaches, and supplies tighten, we’re possibly going to see oil prices remain strong as temperatures drop.

Goldman Sachs is feeling particularly confident, having revised its year-end price targets up to $87 for WTI and $90 for Brent.

Goldman said: “While we have long held a bullish oil view, the current global oil supply-demand deficit is larger than we expected, with the recovery in global demand from the Delta impact even faster than our above-consensus forecast and with global supply remaining short of our below consensus forecasts.

“The current oil supply-demand deficit is larger than we expected, with the recovery in global demand from the Delta impact even faster than our above-consensus forecast and with global supply remaining short of our below consensus forecasts.”

Price action is still very much a tightrope act. With the news that US Shale is ready to start drilling, and could add up to 800,000 bpd to supplies, the supply/demand balance could be upset.

Natural gas trading

If you thought crude oil was in a strong position, wait until you see natural gas.

Natural gas prices rose sharply on Monday to reach close to yearly highs at $5.30 before soaring to an unprecedented $6.13 on Tuesday morning.

A squeeze on supply caused by Hurricane Ida is offering support in the US. A large chunk of Gulf of Mexico and Southern US infrastructure is still closed for repairs or maintenance, lowering supply levels, after being hit by Ida earlier in September.

Let’s be clear: this is a global phenomenon. Simply put, there isn’t enough natural gas currently to satiate demand.

Prices of utility gas are skyrocketing in the US, EU, and UK as well as in Asia where demand is intensifying.

Switching back to the US, we should be in the midst of a sustained inventory build-up. It’s injection season – the period where more gas is squirrelled away in anticipation of high winter demand. However, it appears that

The latest Energy Information Administration (EIA) data showed a build-up of 76 billion cubic feet (Bcf) for the week ended September 17th. This was higher than the expected 70 BCf – but stocks remain some 598 Bcf lower than this time last year.

Looking at short-term weather-driven demand, Natural Gas Weather reports: “National demand will remain light this week as highs of 60s to 80s rules most of the U.S. and with very little coverage of highs into the 90s. Overall, national demand will be low to very low into the foreseeable future.”

Are these five gas crisis stocks worth a look?

As the European gas crisis threatens to go global, Morgan Stanley eyeballs some stocks that could benefit from the current conditions.

Gas crisis stocks

Gas prices soar in Europe

The EU’s natural gas import prices have skyrocketed 440% in recent weeks, putting massive strain on energy firms across the continent. The same is true in the UK where surging gas prices have caused several small energy suppliers to fold completely.

In the US, prices were up 100% year-on-year midway through September.

Globally, prices are roughly 250% higher than they were in January.

Henry Hub natural gas futures are showing rapid daily gains. At the time of writing, the HH contract is up over 7.2% in trading today. Prices are approaching yearly highs at $5.53.

We’re very rapidly approaching crunch time. The UK, for example, only has enough gas to last four or five winter days. Combine with food and petrol shortages, the winter is looking very cagey for Britain right now.

The US should also be gearing up injection season right about now. Usually lasting up to Halloween, injection season is when natural gas stocks start to build in preparation for high winter demand. The latest Energy Information Administration (EIA) data showed a build-up of 76 billion cubic feet (Bcf) for the week ended September 17th. This was higher than the expected 70 BCf – but stocks remain some 598 Bcf lower than this time last year.

Skyrocketing prices can be explained simply: there isn’t enough to go around.

Cold temperatures around the world last winter led to higher-than-expected drawdowns. Without adequate inventory replenishment, things were always going to escalate.

There is also heightened consumption and competition from Asia to contend with. Wood Mackenzie estimates that Asia, in particular China, will account for 95% of worldwide LNG demand growth by 2022. China’s appetite for LNG is such that even the $400bn, 30-year deal Beijing struck with Russia’s Gazprom in 2014 will not even scratch the surface of China’s gas requirements.

A perfect gas storm has been brewing and we’re seeing the cons

Which stocks can potentially benefit from the gas crisis?

According to Morgan Stanley, the current market conditions are ripe for investors and traders looking to add utility firms to their portfolios.

The five stocks selected by Morgan Stanley include:

  • Ørsted
  • Iberdrola
  • RWE
  • EDF
  • Engie

“Buy Ørsted (Overweight) and Iberdrola (Overweight) on weakness: We recognise that the recent gas clawback will have a negative impact on 2021 and 2022 earnings for Iberdrola … triggering EPS downgrades. However, this appears well priced in with Iberdrola’s market cap,” Morgan Stanley analysts said in a statement.

For context, the Spanish government has announced a 2.6bn euro tax on energy firms to help protect consumers.

The bank also said Ørsted has an estimated 34% potential upside to its price target, while for Iberdrola the figure is 38.7% (within Morgan Stanley’s 12-18 month price target).

Morgan Stanley also said: “We see RWE (Overweight), EDF (Overweight) and Engie (Overweight) as our preferred names to play the strength in power prices, with limited contagion risk from political intervention.”

According to the investment bank, RWE has a potential 35.4% upside to Morgan Stanley’s price target, the analysts estimated. For EDF the figure is 58.1% and for Engie it is 44.5%.

Of course, you could also look at trading pure natural gas contracts too away from stocks. Forecasts are calling for this winter to be one of the coldest for years, with the US meteorological department saying February will be the coldest month.

There may also be some overlap in the above for those interest in renewable energy. Ørsted covers 29% of the world’s offshore wind power segment. The Norwegian energy supplier made our list of renewable energy stocks to watch in 2021 as a result of its major market presence and future potential.

Cryptocurrency update: China’s crypto clampdown intensifies

Beijing announces some of the toughest measures against cryptocurrency to date.

Cryptocurrency update

China announces harshest anti-crypto measures yet

Bitcoin was rocked on Friday by a big right hook delivered by the People’s Bank of China.

China’s central bank has ruled that all cryptocurrency transactions made in the country, and all those coming from overseas made by domestic Chinese citizens, are illegal.

Naturally, this caused a landslide in BTC prices. The coin dropped over 8% on the day – although it has since clawed back some of those losses and is trading into the green as of Monday 27th September.

This is the harshest and most blatant anti-crypto measure undertaken by China to date.

Beijing’s official stance is that cryptocurrency is a) illegitimate, b) an environmental disaster, and c) something it cannot control completely. Freeing finances from government oversight is the entire point of decentralised finance (DeFi) after all. In a country as centralised as China, that’s a no-go.

From here on out, it’s pretty much a given that Chinese measures against crypto will get even tighter.

The POBC has said monitoring will step up to stop banks handling any crypto-related transactions. Bank bitcoin transactions were ruled out by China as early as 2013, so really this shouldn’t come as a surprise.

Authorities will now seek to eradicate mining operations entirely. Recently, over 10,000 mining rigs were seized in Inner Mongolia, one of the busiest regions for cryptocurrency mining in China, as the nation steps up its efforts.

This could have major consequences for global Bitcoin supplies. The hash rate slowed dramatically when the last wave of Chinese anti-mining operations went into overdrive back in June. Expect more of the same – although that could benefit prices (scarce supply + high demand = profit?).

Now it’s a scramble from international exchanges to drop Chinese customers.

Huobi and Binance, two of china’s biggest exchanges, has stopped registrations for new Chinese clients. Wallet supplier TokenPocket has also said it will be winding up services for mainland Chinese customers and would willingly embrace regulation.

Twitter rolls out Bitcoin tipping

The rest of this article will look at those who feel more positively about crypto. Twitter CEO Jack Dorsey is certainly one of them.

It was announced last week that Twitter will now start accepting tips in the form of Bitcoin payments. That’s right: if you like a tweet you can show your appreciation by sending the original poster a little chunk of cryptocurrency for their troubles.

Twitter has turned to Lightning to enable Bitcoin integration. The feature is currently available for iOS users only. Android Twitter browsers will support it soon, according to Dorsey, but the launch date is yet to be revealed.

Clicking on the feature enables users to tip creators through third-party services like CashApp, which is operated by Square, Jack Dorsey’s payment platform.

There is also talk of Twitter going in hard on non-fungible tokens (NFTs) – a new digital way to present and own media.

These digital assets — often JPEG artwork — have exploded in popularity and are often used as profile pictures. Twitter is working on a solution to authenticate whether a user actually owns said JPEG.

This could give NFTs a fresh sheen of legitimacy.

Either way, it’s very clear that Jack Dorsey is a big crypto fan. It might also be helping crypto prices in general. On Friday, following the POBC statement, the market was a sea of red. Now, it’s much more balanced with key tokens back in the green.

That’s the power of social media for you.

Cardona to pump $100m into DeFi

While China has made its stance on decentralised finance abundantly clear, there are others who are convinced it is the future.

Emurgo, the investment wing of the Cardano network, which uses the coin of the same name, has pledged to invest $100m into developing DeFi.

The announcement was made by Emurgo CEO Ken Kodama at the 2021 Cardano Summit – an annual conference dedicated to everything involving the world’s fourth-largest blockchain.

Kodama said this major investment would accelerate the development of the Cardano ecosystem.

Emurgo’s plan seems to cover all bases, seeking to boost blockchain education, NFT solutions, and pioneer DeFi as a whole.

This isn’t the only thing Emurgo plans to invest in. At Sunday’s Summit, the company announced it also plans to pump more funding into African artificial intelligence, blockchain, and smart technologies firm Adanian Labs.

As well as being a blockchain network, Cardano is also one of the world’s foremost altcoins (i.e., a token that is not Bitcoin). Despite this big announcement, the token was in the red. Cardano had fallen 2.5% in trading on Monday morning.

Oil pulls back while gas remains strong

Key benchmarks have dropped from highs seen last week while natural gas, while dipping, is still strong.

Oil trading

External factors have caused oil prices to peel away from the big gains made last week. Prices began falling on Friday, and they’ve subsequently stabilised a little as of Tuesday.

WTI had breached the $71 level while Brent was punching towards the $74 level. Both benchmarks were showing positive movements on Tuesday morning, with WTI up nearly 1% on the day after falling by the same level on Monday. Brent had made 0.6%.

A stronger greenback has been hitting dollar-denominated crude across the week. At the upcoming Fed meeting, markets are expecting to see more concrete stimulus tapering agreements, which has lit a small fire under the dollar.

Elsewhere, the potential collapse of Chinese property giants Evergrande is causing massive ripples around the world. The effects are starting to seep into oil markets as China ponders a potential financial crisis.

Another threat to oil prices is increased supply. Supply/demand metrics have been on a delicate balance throughout the duration of the pandemic. Adding more could upset that.

Nine new rigs have been added to US infrastructure, according to Baker Hughes, bringing the total up to 512.

Despite this, 23% of Gulf of Mexico rigs remain shuttered thanks to Hurricane Ida. We may not be seeing a US oil glut just quite yet, but it is something to think about.

In terms of demand outlook, we all know Delta variant has thrown a rather large spanner in the works this year.

However, OPEC+ has revised its demand recovery predictions for 2022 upward by 900,000 barrels. A mix of strong economic growth and higher fuel consumption should power total annual demand to 100.8m bpd next year, according to OPEC+.

The US’ decision to open up flights to fully vaccinated travellers from the UK and EU will also help generate more demand as trans-Atlantic flights pick up.

A quick look at the most recent US crude inventories report shows a 6.4m barrel drawdown. At 417.4 million barrels, US crude oil inventories are about 7% below the five year average for this time of year, according to EIA data.

Natural gas trading

Natural gas prices started the week by pulling back from the previous week’s highs. As of Monday, prices had dropped from the mid-week $5.60 level to the $5.01 mark.

It’s thought that higher winter-driven demand has already been priced into natural gas contracts, hence the prices we’re seeing now.

In the short term, US weather patterns point to medium to low demand this week, which may help bring prices back down to earth.

Working gas in storage was 3,006 Bcf as of Friday, September 10, 2021, according to EIA estimates. This represents a net increase of 83 Bcf from the previous week. Forecasts called for a 76 Bcf build-up.

As we’re in injection season, the US could be about to fall behind the 3.5 trillion cubic feet needed to satiate winter demand. If conditions are particularly harsh, then prices may rocket as temperatures drop.

For context, 2020’s winter build-up, as of the close of injection season on October 31st, was over 3.9 Tcf.

It looks like there is some catching up to do for US gas stockpiles.

Elsewhere, China’s gas consumption potential is being flagged as “stunning”. Alexey Miller, CEO of Gazprom, has said the world’s second-largest economy’s natural gas consumption is growing at a faster rate than any other Asia-Pacific nation.

According to Miller, China’s natural gas consumption increased by more than 15% in the first half of 2021. Imports increased by more than 23% during the same period.

This will all be music to Miller’s ears. In 2014, Gazprom inked a $400bn supply deal with China to deliver gas over 30 years.

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