It probably won’t be a surprise to you that Elliott Wave International is an advocate of technical analysis. After all, the Elliott wave method is a form of technical analysis.
You probably know that the term “technical analysis” refers to analyzing the behavior of financial markets themselves — generally by studying charts — as opposed to “fundamental” analysis, which is based on news and events outside of financial markets.
One of the many classic technical-analysis chart patterns is known as a double top. (Conversely, a double bottom is the same reversal formation after a significant prior down move.) Getting back to the double top, the first price high (or top) is followed by a moderate decline. The price then rises into the same territory as the prior high, which is the second top.
In August, the European Financial Forecast, a monthly Elliott Wave International publication which covers European financial markets and is also part of the monthly Global Market Perspective, said:
Natural gas has formed a bearish double top.
Keep in mind that this analysis was provided even though energy analysts were calling for natural gas prices to remain elevated due to “fundamentals,” for example, “supply strains.” Here’s a July 25 headline (The Financial Times):
Traders expect European gas prices to remain elevated for years to come
Instead of remaining elevated, the price of natural gas fell, which was right in line with our analysis of that double top in the August Global Market Perspective.
The JanuaryGlobal Market Perspective provides a review with this chart and commentary:
The chart illustrates the continuous natural gas futures contract that trades on the New York Mercantile Exchange.
In August, we illustrated this contract along with 15 other key commodities and stated that gas prices had formed a bearish double top. In a matter of weeks, futures collapsed 50% and penetrated a key technical support level at [a key Elliott wave]. The same support level failed again last month.
True, not all analysis based on a market’s “technicals” works out as expected, but often, it does — or at least gets very close.
See how Elliott Wave International’s global analysts apply Elliott wave and technical analysis to other financial markets — free — for a limited time.
This article was syndicated by Elliott Wave International and was originally published under the headline Natural Gas: Here’s What Happened After a “Double Top”. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.
Looking back on 2022, one of the biggest fears about oil was that prices would skyrocket even more than they did due to a disruption in supply from Russia.
Of course, Russia has been a major world supplier of oil, but after Russia invaded Ukraine, many global financial institutions refused to back transactions involving Russian oil.
So, back in March of 2022, we had this headline from a major financial website (CNBC, March 4):
Oil market heads for ‘biggest supply crisis in decades’ with Russia’s exports set to fall, IEA says
Conventional wisdom says that a disruption in supply, let alone the biggest in decades, would lead to soaring oil prices.
However, at the time that March headline published, NYMEX crude oil was trading around $115 a barrel — and prices have been in a downtrend for most of the time since, for almost a year now.
In December, even the New York Times had a hard time explaining the disconnect (Dec. 9):
Oil Prices Drop, Despite Heightened Sanctions on Russian Crude
So, what’s going on?
Well, Elliott Wave International has studied the historic price patterns of oil and has concluded that investors cannot count on a relationship between prices and the oil market’s “fundamentals.”
Indeed, Robert Prechter’s Socionomic Theory of Finance provided historical analysis with this chart and commentary:
[The chart] shows the annual ratio between consumption and production worldwide. … Take a look at the three shaded trends on the graph. The huge surge in the ratio between 1980 and 1982 — the biggest rise on the chart — did not cause the price of oil to rise; rather, it fell, a lot. Nor did the large decline in the ratio between 2002 and 2005 cause the price of oil to fall; rather, it rose, a lot. And the rapid plunge in the ratio during 2009 did not cause the price of oil to fall; rather, it tripled. These extreme anomalies render the proposed causality spurious.
What Elliott Wave International has observed is that oil’s price does tend to follow Elliott wave patterns. As you probably know, Elliott waves reflect the repetitive patterns of investor psychology, the primary driver of financial markets.
Using the Elliott wave model, the December Global Market Perspective, a monthly Elliott Wave International publication which covers 50-plus financial markets, stated:
Crude should be at the forefront of a … decline.
Indeed, as of this intraday writing on Jan. 9, NYMEX crude oil is trading lower than it was when the December Global Market Perspective published.
Now, the new January Global Market Perspective offers more insight into what you can expect for oil’s future price path.
And, speaking of the Elliott wave model, if you’re new to the subject, or simply need a refresher, read Frost & Prechter’s Elliott Wave Principle: Key to Market Behavior. Here’s a quote:
In markets, progress ultimately takes the form of five waves of a specific structure. Three of these waves, which are labeled 1, 3 and 5, actually effect the directional movement. They are separated by two countertrend interruptions, which are labeled 2 and 4. The two interruptions are apparently a requisite for overall directional movement to occur.
[R.N.] Elliott noted three consistent aspects of the five-wave form. They are: Wave 2 never moves beyond the start of wave 1; wave 3 is never the shortest wave; wave 4 never enters the price territory of wave 1.
… Elliott did not specifically say that there is only one overriding form, the “five-wave” pattern, but that is undeniably the case. At any time, the market may be identified as being somewhere in the basic five-wave pattern at the largest degree of trend. Because the five-wave pattern is the overriding form of market progress, all other patterns are subsumed by it.
Read EWI’s new Global Market Perspective FREE
Now — February 3
Dozens of markets around the globe are ending Elliott wave patterns right now. When they turn, they will make headlines.
And can change fortunes.
You can be ahead of that news — ready, waiting and well-positioned. EWI’s freeState of the Global Markets event will get you ready.
Starting on January 16, and every two days, you’ll get a section of the latest issue of EWI’s Global Market Perspective.
At the end, you’ll have the entire January 2023 Global Market Perspective. This will arm you with the wave patterns around the world that are about to reverse.
Don’t miss it. And don’t miss the edge it will give you. Follow the link to join in free below.
This article was syndicated by Elliott Wave International and was originally published under the headline Why Oil Prices Fell in the Face of “Supply Shock”. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.
The transformational acquisition of interests in various oilfield-holding licenses is expected to generate “substantial free cash flow,” noted a Research Capital Corp. report.
Valeura Energy Inc. (VLE:TSX; PNWRF:OTCMKTS) will acquire offshore oil assets in the Gulf of Thailand, “a transformational action that provides a huge boost to cash flow,” reported Research Capital Corp. analyst Bill Newman in a Dec. 6 research note.
To reflect the deal, Research Capital increased its target price on the Canadian oil and gas company to CA$8.25 per share from CA$1.45, its current share price. From here, the target represents a possible 469% return for investors.
“We expect the assets will generate substantial free cash flow to fund development and appraisal projects to extend the life of the reserves, help to fund the company’s other Thailand assets, and provide capital for additional acquisitions,” wrote Newman.
Research Capital Corp. maintains its Speculative Buy rating on Valeura.
Valeura’s management team forecasts 2023 pretax annual cash flow of US$360 million (US$360M) from the new assets, Newman noted; Research Capital estimates funds flow forecast next year to be US$206M.
The three assets Valeura is to acquire, relayed Newman, are:
an operated 100% interest in the B5/27 license holding the Jasmine and Ban Yen oilfields
an operated 90% working interest in the G11/48 license holding the Nong Yao oilfield
a 70% interest in the G1/48 license holding the Manora oilfield
Newman noted these concessions have a current combined net oil production of about 21,200 barrels per day.
“The oilfields are midlife to mature assets but with additional development opportunities that can significantly extend the life,” he added.
For the acquisition, Valeura will pay US$10.4M in cash plus a possible maximum contingent payment of US$50M, due only if oil prices are high. Specifically, this payment is based on average oil prices in 2022, 2023, and 2024 and kicks in when the Dubai benchmark average exceeds US$100 per barrel. The Calgary, Alberta-based company will make the purchase through Valeura Energy Asia Pte. Ltd., a subsidiary and special purpose vehicle.
“In our conservative scenario, which includes the max contingent payment and our estimated discounted decommission costs of US$168.4M, the transaction metrics remain compelling at US$9.47 per barrel and $10,774 per flowing barrel,” Newman highlighted.
Research Capital Corp. maintains its Speculative Buy rating on Valeura.
Disclosures: 1) Doresa Banning wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
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4) This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the decision to publish an article until three business days after the publication of the article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases.
Disclosures For Research Capital Corp., Valeura Energy Inc.
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The year 2022 was a tough one for the growing number of people living in food insecurity and energy poverty around the world, and the beginning of 2023 is looking bleak.
Russia’s war on Ukraine, one of the world’s largest grain and fertilizer feedstock suppliers, tightened global food and energy supplies, which in turn helped spur inflation.
Drought, exacerbated in some places by warring groups blocking food aid, pushed parts of the Horn of Africa toward famine. Extreme weather disasters have left trails of destruction with mounting costs on nearly every continent. More countries found themselves in debt distress.
But below the surface of almost weekly bad news, significant changes are underway that have the potential to create a more sustainable world – one in which humanity can tackle climate change, species extinction and food and energy insecurity.
I’ve been involved in international sustainable development for most of my career and now teach climate diplomacy. Here’s how two key systems that drive the world’s economy – energy and finance – are starting to shift toward sustainability and what to watch for in 2023.
Ramping up renewable energy growth
Russian President Vladimir Putin’s war on Ukraine has reverberated through Europe and spread to other countries that have long been dependent on the region for natural gas. But while oil-producing countries and gas lobbyists are arguing for more drilling, global energy investments reflect a quickening transition to cleaner energy.
In December, the International Energy Agency published two important reports that point to the future of renewable energy.
First, the IEA revised its projection of renewable energy growth upward by 30%. It now expects the world to install as much solar and wind power in the next five years as it installed in the past 50 years.
The second report showed that energy use is becoming more efficient globally, with efficiency increasing by about 2% per year. As energy analyst Kingsmill Bond at the energy research group RMI noted, the two reports together suggest that fossil fuel demand may have peaked. While some low-income countries have been eager for deals to tap their fossil fuel resources, the IEA warns that new fossil fuel production risks becoming stranded, or uneconomic, in the next 20 years.
The main obstacles to the exponential growth in renewable energy, IEA points out, are antiquated energy policy frameworks, regulations and subsidies written at a time when energy systems, pricing and utilities were all geared toward fossil fuels.
Look in 2023 for reforms, including countries wrestling with how to permit smart grids and new transmission lines and finding ways to reward consumers for efficiency and clean energy generation.
The second system to watch for reform in 2023 is international finance. It’s also crucial to how low-income countries develop their energy systems, build resilience and recover from climate disasters.
Wealthy nations haven’t moved the energy transition forward quickly enough or provided enough support for emerging markets and developing countries to leapfrog inefficient fossil-fueled energy systems. Debt is ballooning in low-income countries, and climate change and disasters like the devastating flooding in Pakistan wipe out growth and add costs.
Barbados Prime Minister Mia Mottley has brought together international financial institutions with think tanks and philanthropists to push for changes.
Countries like Mottley’s have been frustrated that the current international financial system – primarily the International Monetary Fund and the multilateral development banks, including the World Bank – haven’t adapted to the growing climate challenges.
Mottley’s Bridgetown Initiative proposes a new approach. It calls for countries’ vulnerability to be measured by climate impact, and for funds to be made available on that basis, rather than income. It also urges more risk-taking by the development banks to leverage private investment in vulnerable countries, including climate debt swaps.
The Bridgetown Initiative also calls for countries to reflow their IMF Special Drawing Rights – a reserve available to IMF members – into a proposed fund that vulnerable countries could then use to build resilience to climate change. A working group established by the G-20 points out that the “easiest” trillion dollars to access for urgent climate response is that already in the system.
In early 2023, Mottley and French President Emmanuel Macron, with others, will drive a process to examine the possible measures to improve the current system before the annual meetings of the World Bank and the IMF in April, and then at a June summit called by France.
Watch in 2023 to see if this is the year the G-7 and the G-20 rekindle their global economic leadership roles. Their members are the largest owners of the international financial institutions, and also the largest emitters of carbon dioxide on the planet. India will lead the G-20 in 2023, followed by Brazil in 2024. Their leadership will be critical.
Watch small nations’ leadership in 2023
In 2023, expect to see small nations increasingly push for global transformation, led by the V-20 – the finance ministers of the countries most vulnerable to climate change.
In addition to the Bridgetown Initiative, Barbados has suggested a way to pool new funds working off the model of an oil spill damage fund at the International Maritime Organization. In the IMO fund, big oil importers pay in, and the fund pays out in the event of a spill. Barbados supports creating a similar fund to help countries when a climate event costs more than 5% of a country’s GDP.
This model is potentially a way to pool funds from a levy on the windfall profits of energy companies that saw their profits soar in 2022 while billions of people around the world suffered from energy price inflation.
Finally, the breakthrough agreement on biodiversity reached in December 2022 provides more promise for 2023. Countries agreed to conserve 30% of the world’s biodiversity and restore 30% of the world’s degraded lands. The funding – a $30 billion fund by 2030 – remains to be found, but the plan clarifies the task ahead and nature’s place in it. And we can hope 2023 is a year when signs of peace in our war against nature break out.
Jericho Energy Ventures Inc. reports gains with strong financial performance in gas, oil, and fuel of the future, hydrogen. Read more to learn the details of this report as well as see what experts are saying about the company.
Jericho Energy Ventures Inc. (JEV:TSX.V; JROOF:OTC PINK: JLM:FRA) has been awarded the Solar Impulse Foundations’ ‘Solar Impulse Efficient Solution’ Label, for its zero-emission Dynamic Combustion Chamber™ (DCC™) hydrogen fueled boiler. The Label seeks to identify solutions that hit high standards in profitability and sustainability and displays them to leading decision-makers hoping to expedite their development.
JEV is an energy company focused on the transition to low-carbon energy solutions, with investments in zero-emission hydrogen technologies. Founded in 2010, the company initially focused its efforts on oil and gas before beginning the transition to green energy in 2020 and continues to use profits from those sectors to fund its research into hydrogen.
Why Hydrogen?
Hydrogen continues to claim its spot on the list of sustainable fuels of the future. As reported by the National Inflation Association, on Dec. 9, the leaders of France, Portugal, and Spain, as well as European Commission President Ursula von der Leyen, met in the Spanish city of Alicante for a discussion on the construction and financing of a new pipeline to carry green hydrogen between Barcelona and Marseille.
The NIA also reported on an announcement from Airbus detailing the development of a hydrogen-powered jet engine for the A380 superjumbo, with test flights due to begin in 2026.
Technical analyst Clive Maund described JEV as an “energy company that is moving with the times,” and it continues to prove it with the development of its hydrogen-fueled product.
The Biden-Harris Administration, through the U.S. Department of Energy (DOE), has also announced US$750 million in funding in a bid to reduce the cost of clean hydrogen technology.
It is hoped the injection of funds will accelerate the expansion of hydrogen use and is an essential part of President Biden’s plan to have a 100% clean electrical grid by 2035 and net-zero carbon emissions by 2050.
Texas Governor Greg Abbott also announced on Dec. 8 that a US$4 billion hydrogen factory will be built in North Texas and will produce more than 73,000 metric tons of green hydrogen per year. This will make it the largest green hydrogen facility in the U.S.
Source: iea.org
The Chairman of the Solar Impulse Foundation, Bertrand Piccard, highlighted that, while heads of state and government officials may say that protecting the environment is too expensive, “solutions exist and represent the biggest market opportunity of our century,” calling it an “opportunity which cannot be missed.”
And Jericho Energy Ventures is not a company that likes to miss opportunities. Back in November, technical analyst Clive Maund described JEV as an “energy company that is moving with the times,” and it continues to prove it with the development of its hydrogen-fueled product.
Catalyst: Expert Says Jericho To Be 2023’s Largest Gainer
While the award was great for Jericho Energy Ventures, it is not the only good news to come from the company. It follows the news that JEV, whose registered office is in Vancouver, BC, reported record oil and gas joint venture results in Q3, a direct result of growing crude oil and natural gas prices in the first three quarters of 2022.
Having begun as an energy company focused on oil and gas, it acquired Hydrogen Technologies in January 2021 as part of its transition to researching and developing green energy solutions. It continues to invest in companies aligned with a low-carbon future, including H2U Technologies Inc., which is developing a new electrolyzer that will facilitate low-cost hydrogen production.
The National Inflation Association predicts that JEV will be one of the market’s largest percentage gainers in 2023.
Jericho Energy Ventures CEO Brian Williamson said that the company continues to “demonstrate that our strategy of providing molecules required for today and tomorrow can yield results for our shareholders. Our steady oil and gas production base provides strong cash flows that feed both strategic initiatives of hydrocarbons today and lower carbon forms of energy tomorrow.”
The National Inflation Association predicts that JEV will be one of the market’s largest percentage gainers in 2023. Investment from billionaire Chris Sacca’s Lowercarbon Capital in January 2022, along with investment from JEV into Supercritical Solutions, will go toward the development of the world’s first green hydrogen electrolyzer. The fact that Chris Sacca is one of the top three most successful technology investors of all time is sure to bring a level of prestige to the work going into development.
The NIA expects JEV’s market cap to “reach levels that are many times higher than today.”
The boiler was developed by JEV’s wholly-owned subsidiary, Hydrogen Technologies, which provides its award-winning clean energy solution for the Commercial and Industrial Boiler Market. The DCC™ produces zero CO2 or Greenhouse Gas emissions and seeks to replace boilers that burn coal, natural gas, fuel oil, or diesel, which will hopefully lead to a significant reduction in global greenhouse gasses emitted each year. It aims to decarbonize the global commercial and industrial heating industry, valued at almost US$30 billion.
Williamson stated, “we are, of course, honored to receive this prestigious recognition from the Solar Impulse Foundation. I applaud the fortitude and determination shown by the Hydrogen Technologies Team, which made this achievement possible, and we look forward to our DCC™ playing a major role in the reduction of greenhouse gas emissions from the commercial and industrial heat and steam market globally.”
Ownership and Share Structure
Retail: 70%
Management/Insiders: 30%
Institutions: 0%
70%
30%
Share Structure as of 12/22/2022
According to Reuters, around 30% of Jericho’s shares are held by management and insiders. CEO Brian Williamson owns 1.26% of the shares, around 2.85 million. Founder Allen William Wilson is at 0.87%, with 1.97 million shares. and board member Nicholas Baxter owns 0.5%, with just over 1.1 million. Founder Allen William Wilson is at 0.87%, with 1.97 million shares.
Around 0.1% of shares are held by institutions. The largest of these is Michael L. Graves Inter Vivos Trust which is at 16.43%, with 37.13 million shares. McKenna & Associates LLC is next at 10.78%, with 24.36 million shares, and Andrew James Mckenna himself is at 0.15%, with 0.35 million shares.
70% of Jericho’s shares are in retail.
JEV’s market cap is CA$81.71 million, and it trades in a 52-week range of CA$0.31 and CA$0.84. It has 226.05 million shares outstanding.
Disclosures: 1) Lauren Rickard wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. They members of their household own securities of the following companies mentioned in the article: None. They or members of their household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: Jericho Energy Ventures Inc. Click here for important disclosures about sponsor fees. As of the date of this article, an affiliate of Streetwise Reports has a consulting relationship with: None. Please click here for more information.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the decision to publish an article until three business days after the publication of the article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Jericho Energy Ventures Inc., a company mentioned in this article.
The Federal Reserve Bank of New York’s Microeconomic Data Center yesterday released its November 2022 Survey of Consumer Expectations, which shows that inflation expectations have declined in the short, medium, and long term. According to the report, expectations for rising home prices will continue to decline while the labor market will continue to strengthen. Household income growth expectations rose to a new high. Investors renewed their optimistic bets ahead of the release of economic data on inflation and the Federal Reserve’s interest rate decision, which is expected later this week. As the stock market closed Monday, the Dow Jones Index (US30) increased by 1.58%, and the S&P 500 Index (US500) added 1.43%. Technology Index NASDAQ (US100) gained 1.26% on Monday. All three indices closed the day in positive territory.
As a reminder, this is one of the busiest macroeconomic weeks of the year, with the four major central banks holding their final policy meetings of the year and data on US consumer inflation, which could play a major role in determining the outlook for the US interest rate and the dollar.
Equity markets in Europe were mostly down yesterday. Germany’s DAX (DE30) decreased by 0.45%, France’s CAC 40 (FR40) lost 0.41%, Spain’s IBEX 35 (ES35) was down by 0.37%, Britain’s FTSE 100 (UK100) closed Monday at minus 0.41%.
UK GDP for October rose by 0.5%, up from minus 0.6% in September and ahead of the consensus forecast of 0.4%. The Bank of England and the UK Treasury have already acknowledged that the country is in recession, although technically, there have not been two consecutive quarters of negative growth so far. There has only been one-quarter of negative growth. Typically, negative economic growth during a recession leads to lower inflation, often to the point of deflation. This gives central banks plenty of room for easing and the government plenty of room to spend. But Britain’s spending is already well above its means, and its debt is too high. High inflation means that the Bank of England cannot begin easing. In fact, it may have to continue tightening, exacerbating the recession. Current market expectations call for the Bank of England to reach its peak rate of around 4% in 2023, and a rate cut is now planned for 2024.
Oil prices jumped by 3% yesterday. Oil was supported by the continued closure of the pipeline that connects Canadian oil to the US Gulf Coast. How long it will take Canada’s TC Energy Corp to clean up and restart its Keystone pipeline is still unknown. TC Energy closed the pipeline after a leak. More than 14,000 barrels of oil leaked from the pipeline last week, the largest US crude oil spill in nearly a decade. A decline in US inflation today could spark further gains in oil prices.
Asian markets were mostly down yesterday. Japan’s Nikkei 225 (JP225) decreased by 0.21%, China’s FTSE China A50 (CHA50) was down by 0.08%, Hong Kong’s Hang Seng (HK50) fell by 2.20%, India’s NIFTY 50 (IND50) gained 0.01%, and Australia’s S&P/ASX 200 (AU200) ended Monday down by 0.45%.
According to data released Monday by the People’s Bank of China (PBOC), Chinese banks provided 1.21 trillion yuan ($173.48 billion) in new yuan loans, almost double October’s 615.2 billion yuan but below analysts’ expectations. Economists are confident that China’s central bank will focus on supporting the slowing economy. The PBOC has already cut the reserve requirement ratio for banks by 25 bps since December 5, freeing up about 500 billion yuan in long-term liquidity to support the fragile economy due to the Covid outbreak.
In Australia, the NAB business confidence index has become negative for the first time since December 2021. Orders declined from +14 in September to +5 in November, indicating a not-rosy outlook. In fact, the gap between current business conditions and business confidence is now at a record low, indicating heightened concerns about the sustainability of the economy next year. The main reasons for the decline in business confidence are high inflation and rising interest rates, which are putting pressure on consumers.
S&P 500 (F) (US500) 3,990.56 +56.18 (+1.43%)
Dow Jones (US30) 34,005.04 +528.58 (+1.58%)
DAX (DE40) 14,306.63 −64.09 (−0.45%)
FTSE 100 (UK100) 7,476.63 +4.46 (+0.06%)
USD Index 105.02 +0.21 (+0.20%)
Important events for today:
– Australia NAB Business Confidence (m/m) at 02:30 (GMT+2);
– UK Average Earnings Index (m/m) at 09:00 (GMT+2);
– UK Claimant Count Change (m/m) at 09:00 (GMT+2);
– UK Unemployment Rate (m/m) at 09:00 (GMT+2);
– German Consumer Price Index (m/m) at 09:00 (GMT+2);
– German ZEW Economic Sentiment (m/m) at 12:00 (GMT+2);
– Eurozone ZEW Economic Sentiment (m/m) at 12:00 (GMT+2);
This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.
The crude oil market keeps trying to stabilise but fails. Brent barrel started this week by an attempt to reach 76.55 USD.
On the whole, the probability of an equally fast decline looks limited. Nonetheless, investors may react negatively to the oil demand forecasts presented by OPEC and the IEA. However, market participants can use the fact that the Keystone Pipeline that delivers crude oil from Canada to the US is still laying idle.
According to Baker Hughes, the number of active drills in the US has dropped by 2 over a week, reaching 625 units.
On H4, Brent has reached the local goal of the wave of decline at 75.33. Today the market is forming a structure of a wave of growth to 89.40. A link of correction to 82.30 is expected, followed by growth to 101.00. Technically, this scenario is confirmed by the MACD: its signal line is headed strictly upwards to zero. A breakaway and further growth to new highs should follow.
On H1, Brent has formed the first impulse of growth to 77.00. A link of correction to 76.06 is not excluded. Then a new structure of growth is expected to develop to 78.78. Technically, this scenario is confirmed by the Stochastic oscillator. Its signal line is under 80, headed strictly down to 50. A bounce off it and growth back to 80 are expected.
Disclaimer
Any forecasts contained herein are based on the author’s particular opinion. This analysis may not be treated as trading advice. RoboForex bears no responsibility for trading results based on trading recommendations and reviews contained herein.
In a bid to arrest escalating power prices, Australia’s federal, state and territory governments have agreed to impose caps on the wholesale price of coal and gas.
Announcing the decision after National Cabinet met on Friday, Prime Minister Anthony Albanese said parliament would be recalled next week to pass the necessary legislation. He indicated there was enough crossbench support for this to be a formality.
There will also be $1.5 billion to subsidise electricity bills for households and small businesses. This will be administered by state and territory governments starting in April 2023, and for households it will be subject to means tests.
For the next year, coal used in Australia cannot be sold in wholesale markets for more than $125 a tonne. Gas used in Australia cannot be sold in wholesale markets for more than $12 a gigajoule.
At the time of writing, the short-term (spot) market price for coal at the Newcastle export terminal was $580 a tonne. Gas could be bought at the Wallumbilla hub near Brisbane for $22 a gigajoule.
With such a big gap between spot coal and gas prices and the announced caps, can we expect much lower gas and electricity prices?
In short, maybe or maybe not.
The aphorism “the devil is in the detail” is made for questions like this. This is because of the complex ways domestic coal and gas markets are linked to export markets, how supplies are contracted, and the lack of publicly available information on supply and demand in these markets.
Effect on coal price
The majority of Australia’s coal-fired electricity generators get their coal from nearby mines. Much of this coal cannot be exported, either because of its low quality (such as the brown coal of Victoria’s Latrobe Valley) or because the transport infrastructure doesn’t exist.
This “mine mouth” coal is therefore unaffected by export prices. Its price is based on extraction and delivery costs, plus a margin (of course). In all cases this is well below the $125 per tonne cap.
There are exceptions. Two of Queensland’s eight coal-fired generators – the government-owned Stanwell and the privately owned Gladstone – are supplied by mines able to divert some coal to export markets.
In NSW, coal from most of the mines that supply the state’s six coal-fired stations can, to varying degrees, be diverted. But much of this supply is already contracted for years ahead, so the export price is unlikely to be an accurate estimate of the price power stations will pay.
As best we know, only the Eraring station, near Newcastle in NSW’s Hunter region, is currently paying a price higher than the cap.
In the National Energy Market covering eastern Australia the price of the most expensive generator sets the price all generators receive. The coal price cap is therefore likely to make a difference to wholesale electricity prices when the Eraring power station is setting the market price.
This happens about 30% of the time, according to the publicly available data. So capping the coal price Eraring will pay much below what it is now paying could have a big effect on electricity prices.
But there’s a caveat. How will Eraring’s coal supplier respond?
Will it continue to supply coal at the lower capped price? Or will it decide to divert that coal to more lucrative export markets?
If the former, we can reasonably say the cap will reduce electricity prices.
If the latter, we could potentially be facing a supply crisis, with much higher electricity prices. If Eraring, the largest generator in eastern Australia, sits idle for want of coal to burn, more expensive gas generators (if available) will have to take its place.
Effects on gas price
What about gas? It’s a similar story to coal, although diverting gas to the export market is easier than for coal (because gas is much easier to move than coal and the pipeline network is much more extensive than the coal freight network).
As a result, domestic spot gas prices are more closely linked to export prices.
Like the coal price cap, the gas price cap is much lower than spot gas price. So the question is whether gas suppliers will sell uncontracted gas at the capped price, or politely decline.
The government hopes the Heads of Agreement with gas suppliers will ensure supply. It remains to be seen whether such a deal will ensure supply at a much lower price than we see in the gas markets today, at least for spot market purchases.
Imperfect information
None of this is to suggest the decision to impose price caps is necessarily flawed.
I do not have the necessary information about the existing situation, or accurate foresight of what lies ahead, to pass a categorical judgement. Presumably neither do any of our governments. None of us can confidently predict success or failure.
At the media briefing to announce the policy, Albanese was asked to quantify the effect on prices. He wisely refused to name a number, but insisted the policy would place “downward pressure” on prices. Presumably the government intends that the rebates (to be funded by federal taxpayers and the jurisdictions) will kick in if the wholesale caps don’t work as hoped.
Are there obviously better solutions?
Orthodox economists would suggest these challenges should be handled outside the market (for example through coal and gas export taxes, which would provide income to bail out exposed customers).
Sounds easy, but here too many devils lurk in the details.
Northern California has some of the strongest offshore winds in the U.S., with immense potential to produce clean energy. But it also has a problem. Its continental shelf drops off quickly, making building traditional wind turbines directly on the seafloor costly if not impossible.
Once water gets more than about 200 feet deep – roughly the height of an 18-story building – these “monopile” structures are pretty much out of the question.
A solution has emerged that’s being tested in several locations around the world: wind turbines that float.
In California, where drought has put pressure on the hydropower supply, the state is moving forward on a plan to develop the nation’s first floating offshore wind farms. On Dec. 7, 2022, the federal government auctioned off five lease areas about 20 miles off the California coast to companies with plans to develop floating wind farms. The bids were lower than recent leases off the Atlantic coast, where wind farms can be anchored to the seafloor, but still significant, together exceeding US$757 million.
So, how do floating wind farms work?
Three main ways to float a turbine
A floating wind turbine works just like other wind turbines – wind pushes on the blades, causing the rotor to turn, which drives a generator that creates electricity. But instead of having its tower embedded directly into the ground or the seafloor, a floating wind turbine sits on a platform with mooring lines, such as chains or ropes, that connect to anchors in the seabed below.
These mooring lines hold the turbine in place against the wind and keep it connected to the cable that sends its electricity back to shore.
Most of the stability is provided by the floating platform itself. The trick is to design the platform so the turbine doesn’t tip too far in strong winds or storms.
Three of the common types of floating wind turbine platform. Josh Bauer/NREL
There are three main types of platforms:
A spar buoy platform is a long hollow cylinder that extends downward from the turbine tower. It floats vertically in deep water, weighted with ballast in the bottom of the cylinder to lower its center of gravity. It’s then anchored in place, but with slack lines that allow it to move with the water to avoid damage. Spar buoys have been used by the oil and gas industry for years for offshore operations.
Semisubmersible platforms have large floating hulls that spread out from the tower, also anchored to prevent drifting. Designers have been experimenting with multiple turbines on some of these hulls.
Tension leg platforms have smaller platforms with taut lines running straight to the floor below. These are lighter but more vulnerable to earthquakes or tsunamis because they rely more on the mooring lines and anchors for stability.
Each platform must support the weight of the turbine and remain stable while the turbine operates. It can do this in part because the hollow platform, often made of large steel or concrete structures, provides buoyancy to support the turbine. Since some can be fully assembled in port and towed out for installation, they might be far cheaper than fixed-bottom structures, which require specialty vessels for installation on site.
Floating platforms can support wind turbines that can produce 10 megawatts or more of power – that’s similar in size to other offshore wind turbines and several times larger than the capacity of a typical onshore wind turbine you might see in a field.
Why do we need floating turbines?
Some of the strongest wind resources are away from shore in locations with hundreds of feet of water below, such as off the U.S. West Coast, the Great Lakes, the Mediterranean Sea and the coast of Japan.
Some of the strongest offshore wind power potential in the U.S. is in areas where the water is too deep for fixed turbines, including off the West Coast. NREL
The U.S. lease areas auctioned off in early December cover about 583 square miles in two regions – one off central California’s Morro Bay and the other near the Oregon state line. The water off California gets deep quickly, so any wind farm that is even a few miles from shore will require floating turbines.
Once built, wind farms in those five areas could provide about 4.6 gigawatts of clean electricity, enough to power 1.5 million homes, according to government estimates. The winning companies suggested they could produce even more power.
But getting actual wind turbines on the water will take time. The winners of the lease auction will undergo a Justice Department anti-trust review and then a long planning, permitting and environmental review process that typically takes several years.
Globally, several full-scale demonstration projects with floating wind turbines are already operating in Europe and Asia. The Hywind Scotland project became the first commercial-scale offshore floating wind farm in 2017, with five 6-megawatt turbines supported by spar buoys designed by the Norwegian energy company Equinor.
While floating offshore wind farms are becoming a commercial technology, there are still technical challenges that need to be solved. The platform motion may cause higher forces on the blades and tower, and more complicated and unsteady aerodynamics. Also, as water depths get very deep, the cost of the mooring lines, anchors and electrical cabling may become very high, so cheaper but still reliable technologies will be needed.
But we can expect to see more offshore turbines supported by floating structures in the near future.
This article was updated with the first lease sale.
National Economic Council Director Brian Deese said yesterday that the US economy is resilient despite the Federal Reserve raising interest rates. Brian Deese also added that low credit card delinquencies and mortgage problems point to resilient household balance sheets, while the labor market and savings rates also point to more robust growth. Moreover, he pointed to slowing inflation as a positive sign of healthier economic growth. But at the moment, the Fed is expected to raise rates again at its meeting next week, and that is putting downward pressure on quotes. As the stock market closed Wednesday, the Dow Jones Index (US30) closed at opening levels, while the S&P 500 Index (US500) was down by 0.19%. Technology Index NASDAQ (US100) fell by 0.51% yesterday. All three indices closed negative.
The 2/10 Treasury bond yield curve flipped by 82 basis points, the biggest reversal in 40 years, signaling growing fears of a potential recession.
The Bank of Canada has chosen a more aggressive 50 bps rate hike, though analysts had expected a 25 bps increase. The Bank of Canada’s overnight rate now stands at 4.25%, the highest since 2008. The Bank of Canada and the Reserve Bank of New Zealand currently hold the highest rates of the major economies. The statement indicates that inflation growth has been more robust than expected, while Canada’s labor market remains “tight” and the economy continues to operate in excess demand. The Bank of Canada plans a final 25 basis point hike early next year and will take a long pause after that. The next meeting is scheduled for January 25.
Equity markets in Europe were mostly down yesterday. German DAX (DE30) decreased by 0.57%, French CAC 40 (FR40) fell by 0.41%, Spanish IBEX 35 (ES35) was down by 0.50%, British FTSE 100 (UK100) closed on Wednesday with minus 0.43%.
European Central Bank Governing Council spokesman Peter Kazimir expressed support for a third straight 75 basis point interest rate hike next week. While the slowdown to 10% in November is welcome, it is too early to declare that the worst of the unprecedented price spike is over, Kazimir said in an interview. According to him, any recession in the eurozone is likely to be short, and inflation will remain above the target level even in 2025. In addition to interest rates, officials will also discuss how to begin writing off about 5 trillion euros ($5.3 trillion) worth of bonds bought in recent years as part of stimulus measures, a process known as quantitative tightening (QT).
The UK and US are forming a new energy partnership aimed at improving energy security and lowering prices. The new partnership will stimulate work to reduce global dependence on energy exports from Russia, stabilize energy markets, and increase cooperation on energy efficiency, nuclear power, and renewable energy. As part of this, the US will export at least 9 to 10 billion cubic meters of LNG over the next year through British terminals, more than double the level exported in 2021.
China seems to have loosened its zero COVID policy considerably, but US crude reserves showed a huge increase in petroleum products, which outweighs the country’s weekly crude consumption. Crude oil inventories were down by 5.187 million barrels, compared to expectations of a 3.305 million barrel decline. That sent crude oil prices down for the fourth straight day, near a yearly low. January WTI crude oil fell by 3% to $72 a barrel. Brent crude oil fell by 2.8% to $77.11/bbl in London trading.
Asian markets were mostly down yesterday. Japan’s Nikkei 225 (JP225) decreased by 0.72%, Hong Kong’s Hang Seng (HK50) was 3.22% lower, and Australia’s S&P/ASX 200 (AU200) was 0.85% lower.
Asian markets were mostly down yesterday. Japan’s Nikkei 225 (JP225) gained 0.24%, Hong Kong’s Hang Seng (HK50) ended the day down by 0.40%, and Australia’s S&P/ASX 200 (AU200) fell by 0.47%.
China on Wednesday announced its biggest easing of COVID restrictions, lifting several travel restrictions and testing mandates. The move sparked some gains in Asian markets in the previous session. But with China still struggling with a record-high daily increase in COVID-19 cases, investors remain uncertain as to when Beijing will announce a full opening.
Japan’s economy shrank at an annualized rate of 0.8% in real terms in the last quarter, down from 1.2% last quarter. Inflation-adjusted real gross domestic product shrank by 0.2% on a quarterly basis. The country recorded an unexpected current account deficit in the third quarter on the back of lower exports and more expensive imports.
S&P 500 (F) (US500) 3,933.78 −7.48 (−0.19%)
Dow Jones (US30) 33,596.87 +0.53 (+0.02%)
DAX (DE40) 14,261.19 −82.00 (−0.57%)
FTSE 100 (UK100) 7,489.19 −32.20 (−0.43%)
USD Index 105.15 -0.43 (-0.41%)
Important events for today:
– Japan GDP (q/q) at 01:50 (GMT+3);
– Eurozone ECB President Lagarde Speaks at 14:00 (GMT+3);
– US Initial Jobless Claims (w/w) at 15:30 (GMT+3);
This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.
