Prices surge, WTI targets $87.50, Brent aims for $92.50. Solid support at WTI’s $85, Brent’s $90. Middle East conflict, supply concerns fuel rise.

• Crude oil markets initially pulled back just a bit during the trading session on Friday but have seen quite a bit of bullish pressure enter late in the day.
• Ultimately, there are a whole plethora of reason to think that they continue to go higher, regardless of the grade of crude oil you are talking about.

The West Texas Intermediate Crude Oil market initially pulled back during the day on Friday as we were waiting for the jobs number. The job summer came and went, and at that point in time traders started to step in and take advantage of the short-term pullback, and it looks like we have continued to see plenty of value hunters come in to try to take advantage of this.

The $85 level underneath will continue to be a massive support level, and the price action on Friday will only have reiterated how supported it will be, due to the fact that it would take quite a bit of effort to sell the market off to reach that region. At this point, I fully anticipate that the WTI Crude Oil marketers looking to the $87.50 level next, followed by the $90 level above.

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Brent markets also initially pulled back a bit during the trading session on Friday, finding a significant amount of support at the $90 level. The $90 level courses a large, round, psychologically significant figure, and in area or that would continue to cause quite a bit of market memory to come into play. We bounced enough to break above the $91 level, and therefore I think we’ve got a very real possibility of going to the $92.50 level based upon previous resistance. With this being the case, the market remains very bullish, but it is also a bit overextended. The overextension of the market could lead into exhaustion, but there are far too many reasons to think that we are going to continue to see buyers regardless.

Keep in mind that the conflict in the Middle East seems to be expanding, and therefore it could offer even more upward pressure to this market. Furthermore, we also have to understand that supply is a bit stretched, therefore it does make quite a bit of sense that we could see the fundamentals continue to come into the picture and lift this market.

Ready to trade WTI Crude Oil FX? We’ve shortlisted the best Forex Oil trading brokers in the industry for you. 

Are you interested in the latest soya bean prices in Nigeria? Look no further! This comprehensive guide provides in-depth insights into the current market trends, regional variations, and factors influencing the cost of this essential legume as of April 2024.

Current Soya Bean Prices in Nigeria

As of April 6, 2024, the average price per kilogram of soya beans in key northern states like Kano and Kaduna stands at ₦550. These regions, known for their conducive climatic conditions and soil quality, are major producers of soya beans in Nigeria.

National Price Trends

Description	Price (Naira)
Average National Price (100kg bag)	₦60,000
Wholesale Price (Per KG)	₦600
Retail Price (Per KG)	₦680
Wholesale Price (Per Ton)	₦600,000
Retail Price (Per Ton)	₦680,000

Regional Variations in Soya Bean Prices

While the northern states like Kano and Kaduna are currently reporting prices around ₦550 per kg, prices can vary across different regions of Nigeria. States like Benue, Niger, and other major soya bean-producing areas may experience fluctuations due to local supply and demand factors.

Factors Influencing Soya Bean Price Fluctuations

The price of soya beans in Nigeria is influenced by several key factors:

1. Supply and Demand Dynamics: The balance between production levels and market demand plays a crucial role in determining soya bean prices.
2. Seasonal Production Changes: Variations in seasonal harvests can impact the overall supply of soya beans, leading to price fluctuations.
3. Market Speculation: Speculation by traders and investors can contribute to price volatility in the soya bean market.
4. Economic Conditions: Broader economic factors, such as inflation, exchange rates, and market uncertainties, can affect the pricing of agricultural commodities like soya beans.

Impact on Producers and Consumers

The increasing soya bean prices in Nigeria have significant implications for both producers and consumers:

• Producers: Higher prices may lead to improved profitability for soya bean farmers, but also increased input costs, affecting overall margins.
• Consumers: Rising soya bean prices can contribute to higher costs for food products that rely on soya beans as a primary ingredient, potentially impacting household budgets and food security.

Stay informed about the dynamic soya bean market in Nigeria by monitoring trusted sources and industry reports. Timely information can help stakeholders make informed decisions regarding production, trading, and consumption of this vital agricultural commodity.

African and Western officials are concerned that the conflicts and coups in the Sahel region could spill over to the coast of West Africa, which hosts several major oil production projects and export terminals.

Since 2020, there have been military coups in Burkina Faso, Mali, and Niger, while violence from Islamist insurgents has spiked in recent months. Anxiety has grown over potential spillovers of extremist violence into the coastal countries in West Africa, including Benin, Cote d’Ivoire, Ghana, and Togo, all west of Nigeria, Africa’s top crude oil producer.    

Cote d’Ivoire has recently seen a major new oil project start-up and a large new offshore discovery, courtesy of Italian major Eni. Benin is expected to soon begin oil exports from landlocked Niger via a new pipeline, Togo aims to introduce energy reforms to boost resource development, while Ghana has a major offshore producing field, Jubilee.

Last year, General Abdourahamane Tiani, the commander of Niger’s presidential guard, was appointed head of state by a governing council set up by military forces that ousted President Mohammed Bazoum. A group of military commanders overthrew the Niger government and the country’s army declared its support for the coup.

In Mali, the notorious Russian mercenary Wagner Group has capitalized on the absence of foreign involvement to expand its influence, according to the Center for Preventive Action (CPA) program. Related: Gold Prices Have Surged 23.3% in the Last Six Months

Extremist violence has surged across the Sahel, with at least 7,800 civilian deaths in the first seven months of 2023, a significant increase from 2022, according to the Armed Conflict Location and Event Data Project (ACLED).    

“Since 2020, the Sahel has experienced seven irregular transfers of power because leaders have failed to address poor governance and public grievances or adequately resourced their militaries to achieve their missions. This turmoil raises the likelihood that these crises will metastasize and spillover to neighboring countries in Coastal West Africa in 2024,” the U.S. intelligence community said in its unclassified annual threat assessment report in February.

“A spread of Sahel-type instability to the hugely more populous littoral states – 368 million people from Senegal to Nigeria – would present a new order of threat to U.S. and international security, trade routes and economies,” The United States Institute of Peace said last month.

U.S. Vice President Kamala Harris announced last year a decade-long U.S. commitment of $100 million “to help address the threats of violent extremism and instability” in the coastal countries of Benin, Cote d’Ivoire, Ghana, Guinea, and Togo.

The EU, for its part, confirmed Europe’s commitment to the Gulf of Guinea, and pledged continued support to counter the spillover of insecurity from the Sahel. The EU handed over 105 armored vehicles to the Ghana Armed Forces, part of a larger funding package from the European Peace Facility, aimed at enhancing “the country’s capacity to respond effectively to potential threats, strengthen intelligence gathering, reinforce border surveillance, and maintain stability in the wider region.”  

Potential spillover of conflicts to the coastal West African countries could endanger some oil projects and deter foreign investment.

In the region, the Jubilee oilfield offshore Ghana saw oil production in the fourth quarter average around 92,400 boepd, one of the minority partners in the field, Kosmos Energy, said in February. Production is expected to rise through this year with additional wells coming online.

Offshore Côte d’Ivoire, Italy’s Eni started production of oil and gas from the Baleine Field in August 2023, less than two years after the field discovery in September 2021. Eni says this is the first Scope 1 and 2 emissions-free production project in Africa. With the start-up of Phase 2 by the end of 2024, field production would rise to around 50,000 bpd of oil and approximately 70 Mscf/d of associated gas.

Then this year, the President of Côte d’Ivoire, Alassane Ouattara, and Eni’s CEO Claudio Descalzi announced a major new oil discovery named Calao. The discovery is now the second largest offshore Côte d’Ivoire, following the Baleine field.

In Benin, a new pipeline from Niger, with a capacity of 110,000 bpd, has been completed, paving the way for higher oil production in Niger and exports from the Benin port of Seme. The first crude lifting from Benin is expected later in April or early May.

By Tsvetana Paraskova for Oilprice.com

More Top Reads From Oilprice.com:

While the West has worked hard to wean itself off of Russian fossil fuels in the wake of the country’s illegal invasion of Ukraine in February 2022, the Kremlin is still raking in the rubles from strong nuclear sector exports. As a result, the Ukraine war grinds on as Russia has managed to sidestep much of the economic damage that sanctions were expected to deliver. However, while the Russian economy is surviving, it certainly isn’t thriving. 

In order to stay afloat, Russia needs to explore more alliances and options for exports and trade partners. With no sign of relations with the West thawing any time soon, Russia seems to be betting big on the nuclear energy sector and nuclear fuel exports. The Kremlin also seems to be scouting out new economic alliances in emerging economies, and particularly in Africa. 

In general, energy ventures in African countries have enormous growth potential as the continent faces rapid industrialization paired with massive population growth. Nuclear offers a particularly alluring option to African nations that are faced with the stark challenge of growing their economies while ‘leapfrogging’ over the development of the continent’s abundant fossil fuel resources straight to clean energy development and buildout. 

Nuclear offers reliable, baseload power without any carbon emissions, and doesn’t have the energy security issues associated with the variability of renewable energies such as solar and wind power, which produce in accordance with weather patterns rather than to meet demand. This makes the addition of nuclear energy production capacity a particularly promising way forward for Africa, which already deals with significant energy security woes. Across the continent, about 600 million people lack access to electricity today. And even in countries that do have developed energy grids, such as South Africa, rolling blackouts are a common occurrence. 

All of this is to say that the African nuclear sector is likely poised for enormous growth. Over the past year, a number of African countries including Uganda, Rwanda and Kenya have announced plans to build nuclear reactors. This push comes as part of a broader global effort to increase investment in nuclear energy expansion as the climate change doomsday clock keeps ticking ever closer to midnight. Africa’s nuclear energy sector, in particular, has nowhere to go but up as nations across the continent need all the energy addition they can get. 

And Russia wants to capitalize on that enormous investment opportunity. On a global level, Russian state-operated nuclear energy firm Rosatom is one of the primary exporters of nuclear fuel, uranium enrichment services, and funding for the construction of new nuclear facilities. This last service is particularly critical in developing economies, as building a new nuclear plant is prohibitively expensive for nearly any private company, even in locations with strong economies and currencies. As a result, nearly one in five nuclear power plants on the planet is either in Russia or is Russian-built. And any expansion in worldwide nuclear power deployment is therefore a boon to the Kremlin’s bottom line.

Already, Russia is making aggressive plays to get in on the ground floor of Africa’s nuclear energy revolution in what the Financial Times recently called a “high-profile charm offensive.” Rosatom recently publicized nuclear energy “co-operation” agreements inked with Mali, Burkina Faso and Algeria. This will build on Russia’s current construction efforts in Egypt, where Rosatom is already building a fourth reactor at the $30bn El Dabaa nuclear power plant. The plant, located outside of Cario, is one of the biggest nuclear construction projects in the world. In order to build the mega-project, Egypt has borrowed a hefty $25 billion from Russia, to be repaid over next 35 years with 3% annual interest. 

Some experts have warned that this is a dangerous dependence for emerging economies such as Egypt and other African nations. “The drawback is that the country develops a strong long-term dependence on Russia to meet one of its most basic needs: electricity provision,” says Hartmut Winkler, professor of physics at the University of Johannesburg. Leaning on a country that is currently at war, and therefore not the most reliable of trade partners, threatens “disruption and ultimate termination of projects already in place.” This is particularly troubling in the context of nuclear power plants, which take over a decade to build.

By Haley Zaremba for Oilprice.com 

More Top Reads From Oilprice.com:

Are you interested in the latest soya bean prices in Nigeria? Look no further! This comprehensive guide provides in-depth insights into the current market trends, regional variations, and factors influencing the cost of this essential legume as of April 2024.

Current Soya Bean Prices in Nigeria

As of April 6, 2024, the average price per kilogram of soya beans in key northern states like Kano and Kaduna stands at ₦550. These regions, known for their conducive climatic conditions and soil quality, are major producers of soya beans in Nigeria.

National Price Trends

Description	Price (Naira)
Average National Price (100kg bag)	₦60,000
Wholesale Price (Per KG)	₦600
Retail Price (Per KG)	₦680
Wholesale Price (Per Ton)	₦600,000
Retail Price (Per Ton)	₦680,000

Regional Variations in Soya Bean Prices

While the northern states like Kano and Kaduna are currently reporting prices around ₦550 per kg, prices can vary across different regions of Nigeria. States like Benue, Niger, and other major soya bean-producing areas may experience fluctuations due to local supply and demand factors.

Factors Influencing Soya Bean Price Fluctuations

The price of soya beans in Nigeria is influenced by several key factors:

1. Supply and Demand Dynamics: The balance between production levels and market demand plays a crucial role in determining soya bean prices.
2. Seasonal Production Changes: Variations in seasonal harvests can impact the overall supply of soya beans, leading to price fluctuations.
3. Market Speculation: Speculation by traders and investors can contribute to price volatility in the soya bean market.
4. Economic Conditions: Broader economic factors, such as inflation, exchange rates, and market uncertainties, can affect the pricing of agricultural commodities like soya beans.

Impact on Producers and Consumers

The increasing soya bean prices in Nigeria have significant implications for both producers and consumers:

• Producers: Higher prices may lead to improved profitability for soya bean farmers, but also increased input costs, affecting overall margins.
• Consumers: Rising soya bean prices can contribute to higher costs for food products that rely on soya beans as a primary ingredient, potentially impacting household budgets and food security.

Stay informed about the dynamic soya bean market in Nigeria by monitoring trusted sources and industry reports. Timely information can help stakeholders make informed decisions regarding production, trading, and consumption of this vital agricultural commodity.

After a positive start to the new financial year 2024-25 (FY25), the second week of April 2024 brings in several key corporate and macroeconomic data releases, which will keep investors on their toes. The first set of January-March quarter results for fiscal 2023-24 (Q4FY24), domestic macroeconomic data, corporate announcements, crude oil prices, foreign capital outflow, and global cues are the main stock market triggers that will guide market direction this week.

Indian stock market traded volatile in the first week of the new financial year but managed to end on a positive note. Weak global cues continue to weigh on the sentiment however, buying in select heavyweights across sectors not only capped the damage but also helped the index to close in the green. Domestic equity benchmarks Nifty 50 and Sensex extended their winning streak and logged a third straight week of gains, with the onset of FY25.

Also Read: Q4 Results Preview | Telecom cos to report moderate growth on ARPU upgrades; Bharti Airtel, Jio to lead the pack

Nifty 50 clocked an all-time high of 22,619 and ended the week above the 22,500 mark with a decent gain of 0.84 per cent. The 30-share BSE Sensex rose 596.87 or 0.81 per cent to finish at 74,248.22 and touched a record high of 74,501.73. Mostly key sectors traded in sync with the move and edged higher wherein metal, realty and banking were among the top gainers.

The highlight of the week was the outperformance of the broader indices with the midcap index claimed its record high at 50,000, recording its biggest weekly gain in seven months, while the smallcap index gained over seven per cent.

The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) unveiled the first policy decision for FY25 and decided to keep the interest rate unchanged for the seventh time at 6.5 per cent, in line with D-Street estimates.

Financial services, the highest weighted sub-index, gained 2.70 per cent this week, its best in four months, led by a rise in top private lender HDFC Bank after it posted a sequential growth in deposits in the March quarter. HDFC Bank gained 7.02 per cent this week, its best since November 2022.

Vinod Nair, Head of Research, Geojit Financial Services said, ‘’Towards the end of the week, volatility rose due to a surge in US bond yields and crude oil prices, along with escalating geopolitical tensions. Despite the RBI’s policy meeting aligning with expectations, concerns surrounding food inflation and alerts of a heat wave tempered market sentiment.”

Also Read: Dividend Yield Stocks: Coal India, GSFC, 8 others among top firms paying high dividends; do you own?

‘’The auto sector anticipates positive results in Q4 due to volume growth in the premium segment and higher price realisation. While weakness in the commercial vehicle and tractor segment continues owing to high base and lower reservoir level. However, the ongoing correction trend in the IT sector, influenced by global uncertainties, is anticipated to persist in the medium term, particularly with muted quarterly expectations,” added Nair.

Moving ahead, some major listings are slated across the mainboard small-and-medium enterprises (SME) segment in the primary market this week. Some new initial public offerings (IPO) across SME segments will open for subscription. The week will be critical from domestic and technical point of view as investors will eye economic indicators and the corporate results.

Also Read: Wipro’s stock price rose 121% during Thierry Delaporte’s tenure, revenue up 47% in last 14 quarters

Overall, analysts expect Nifty 50 to be in a consolidation phase with a prevailing bullish bias around 22,500. Experts advise traders to continue with ‘buy on dips’ approach until Nifty 50 breaks 22,200 and also suggest to focus on stock selection and not getting carried away with the recovery in broader indices.

Here are the key triggers for stock markets in the coming week:

Domestic Macroeconomic Data, Q3 Results:

Indian companies are set to enter the new corporate earnings Q4fy24 season this week. Leading the pack is information technology (IT) services giant Tata Consultancy Services (TCS), set to kick off the earnings season for the quarter ending March 2024. TCS Q4 results for the fourth quarter of FY24 will be announced on Friday, April 12, 2024, aftermarket trading hours.

Investors will also keenly eye macroeconomic data this week as India’s consumer price index (CPI)-based inflation or retail inflation rate for March 2024 and the index of industrial production (IIP) data for February are also scheduled to be released on April 12.

Also Read: DCG Cables & Wires IPO to open on April 8: Check key dates, price band, other details3 new IPOs, 6 listings to hit D-Street

In the SME segment, DCG Cables & Wires IPO and Teerth Gopicon IPO will open for subscription on April 8. Greenhitech Ventures IPO will open for bidding on April 12, 2024.

Among listings, shares of Bharti Hexacom will debut on stock exchanges BSE, NSE on April 12. Additionally, on April 8, shares of Yash Optics & Lens and K2 Infragen will debut on NSE SME and shares of Jay Kailash Namkeen will debut on BSE SME. On April 9, shares of Aluwind Architectural and Creative Graphics Solutions India will get listed on NSE SME.

FII Activity

Foreign portfolio investors (FPIs) started the new fiscal 2024-25 (FY25) on a subdued note after emerging as net buyers in Indian equities and debt during FY24. FPIs pumped ₹2.04 lakh crore in Indian equities during FY24, which was the highest FPI inflow since FY21 when the total investment stood at ₹2.74 lakh crore, according to stock exchange data.

FPIs have sold ₹325 crore worth of Indian equities and the total inflow stands at ₹1,444 crore as of April 5, taking into account debt, hybrid, debt-VRR, and equities, according to National Securities Depository Ltd (NSDL) data. The total debt inflows stand at ₹1,215 crore this month so far.

“There have been big swings in US bond yields this year in response to expectations regarding rate cuts by the Fed. The year started with market discounting six rate cuts in 2024 and consequently the yields drifted down. Then the market started factoring in only three rate cuts since the US labour market continued to be tight,” said Dr. V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

Also Read: FY24 Review: FPIs infused ₹2 lakh crore in Indian equities, highest since FY21; What lies ahead?

‘’Now many experts think that there may be only two rate cuts and these will be back loaded in 2024. Consequently the US 10-year yield has spiked to 4.4 per cent. This will impact FPI flows into India in the near term. However, FPI selling will be limited despite the high US bond yields since the Indian stock market is bullish and has been setting new records consistently. An important trend in FPI activity is the big selling in the FMCG segment and big buying in telecom and realty,” added Dr. V K Vijayakumar.

Foreign institutional investors (FIIs) were net sellers for four out of five sessions in Indian markets last week and the net outflow stands at ₹3,835.75 crore, while the inflows and outflows by domestic institutional investors (DIIs) counterbalanced each other last week, according to stock exchange data.

Global Cues

On the global front, the US market has shown some profit booking from higher levels due to heightened attention on the rising US bond yield, rising commodity prices (crude oil, gold, and silver), and also the geopolitical situation (the Iran-Israel proxy conflict and the Russia-Ukraine war). These factors will be closely monitored, as they have the potential to influence market sentiment, according to Santosh Meena, Head of Research, Swastika Investmart Ltd.

Additionally, the US will announce its inflation rate on April 10, 2024. The US non-farm payrolls and unemployment rate for March that were disclosed on April 5, 2024, and will play a significant role in shaping the market mood in the near term. The European Central Bank (ECB) will also unveil its interest rate decision in the coming week.

Also Read: Explained | Why are crude oil prices elevated after OPEC+ policy decision and how will it impact India?

‘’The performance of the US markets, after the recent decline, will also be in focus and a close below 38,500 in the Dow Jones Industrial Average (DJIA) may prompt further fall. On the higher side, it would face stiff resistance around the 39,300-39,800 zone,” said Ajit Mishra, SVP – Technical Research, Religare Broking Ltd.

Oil Prices

International crude oil prices hit their six-month high mark in the previous session, reporting a second straight weekly gain, driven by the ongoing geopolitical conflicts in the Middle-East. Brent and US West Texas Intermediate (WTI) crude oil benchmarks last rose more than $1 per barrel with Brent settling at $91.17 per barrel, up 52 cents, or 0.57 per cent.

US WTI crude closed at $86.91 a barrel. Both benchmarks notched more than four per cent gains last week after Iran, vowed revenge against Israel for an attack. Last week, the Organization of the Petroleum Exporting Countries and allies (OPEC+) kept its oil supply policy unchanged and pressed some countries to increase their respective compliance with the targeted output cuts.

Corporate Action

In the second week of the new fiscal 2024-25 (FY25), Shares of several companies such as Vesuvius India, Sun TV Network, Goodluck India Ltd, DCM Shriram Industries, among others will trade ex-dividend, starting from Monday, April 8. Along with these, some other firms will also trade ex-split, ex-rights, and ex-bonus, according to data on the BSE. Check full list here

Technical View

Nifty 50 is currently in a consolidation phase, hovering around the 22,500 mark with a prevailing bullish bias, according to Swastika Investmarts’ Santosh Meena. Religare Brokings’ Ajit Mishra said, ‘’We are currently seeing time-wise correction in Nifty around its record high and it is healthy amid weak global cues. Traders should continue with a “buy on dips” approach until Nifty breaks 22,200.”

‘’On the higher side, it can gradually inch towards the 22,700-22,850 zone. Meanwhile, participants should maintain their focus on the selection of stocks and suggest not to get carried away with the recovery in broader indices and stick only with the quality names,” added Mishra.

Also Read: Stocks to buy: Balaji Amines, Deepak Nitrite among 6 chemical stock picks by Vaishali Parekh of Prabhudas Lilladher

According to Arvinder Singh Nanda, Senior Vice President, of Master Capital Services Ltd, the support is expected around the 22,400-22,300 range. ’’The near-term trajectory of the Nifty remains positive, and the current range-bound movement suggests the potential for significant swings in either direction,” said Nanda.

‘’This market behavior indicates a tightening range near record highs. It would be prudent to monitor for a range expansion around the 22,600 and 22,300 levels on both ends”, added the analyst.

Bank Nifty exhibits notable strength, marked by a breakout from a bullish cup and handle formation, signaling potential upward momentum towards the coveted 50,000 level, according to Santosh Meena.

‘’Looking ahead, we anticipate encountering an immediate obstacle at 48,650. However, should we surpass this level, the upward momentum is expected to persist, potentially reaching up to 49,400. It’s noteworthy that the range between 47,800 and 47,500 holds paramount importance as a crucial support zone in the near term,” said Arvinder Singh Nanda.

Disclaimer: The views and recommendations above are those of individual analysts and broking companies, not of Mint. We advise investors to check with certified experts before taking any investment decisions.

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Brent crude has topped $90 per barrel for the first time since October, as Middle East tensions threaten to boil over into a wider regional war. Oil markets are increasingly pricing increased geopolitical risk after Iran promised retaliation following this week’s Israeli strike in Syria that killed high-ranking Iranian military personnel. Whereas the majority of analysts remain cautious with their oil price targets, commodity analysts at Standard Chartered have predicted that Brent will average $94 per barrel during the current quarter.

Unfortunately, the same cannot be said about natural gas markets. Warmer-than-expected winters for two years in a row have left gas markets awash with the commodity, taking a toll on gas prices and the equities that track them. A late cold snap has helped to extend the EU gas withdrawal season for another week; however, it’s unlikely to change the bigger picture after Europe exited the winter heating season with its highest level of natural gas inventories. According to to data from Gas Infrastructure Europe (GIE), the EU’s natural gas storage capacity at the end of March was 68.59 billion cubic meters (58.7% full), 4.32 bcm higher than a year ago; 21.16 bcm above the five-year average and the highest level on record at the end of any winter.

The same scenario has been playing out in the U.S. gas market. Natural gas stocks for the week ended March 29, 2024 were 2,259 Bcf, 422 Bcf higher than last year’s comparable period and 633 Bcf above the five-year average of 1,626 Bcf. Related: Musk Lashes Out at Reuters for “Lies” Over Inexpensive EV

Not surprisingly, natural gas prices have been hammered: European natural gas futures were trading at €26.6/MWh on Thursday, 50% lower than the 52-week high achieved in October while Henry Hub gas was quoted at $1.82/MMBtu, good for a 30% drop in the year-to-date. Exchange-traded funds (ETFs) that track natural gas have emerged as some of the worst performing equities in the current year. At a time when the S&P 500 has climbed nearly 10% in the year-to-date, United States Natural Gas Fund, LP ETF (NYSEARCA:UNG) has declined 24.9% while the  ProShares Ultra Bloomberg Natural Gas ETF (NYSEARCA:BOIL) is down 50.9%. The worst performing ETFs so far this year are those that bet against AI and GPU chipmaker, Nvidia Corp. (NASDAQ:NVDA): T-Rex 2X Inverse NVIDIA Daily Target ETF (NVDQ) has cratered 74.3% YTD while GraniteShares 2x Short NVDA Daily ETF (NASDAQ:NVD) has tanked 72.2%.

Interestingly, betting against natural gas has become a smart play with the ProShares UltraShort Bloomberg Natural Gas ETF (NYSEARCA:KOLD) up 47% YTD and 88.6% over the past 12 months. KOLD seeks daily investment results, before fees and expenses, that correspond to two times the inverse (-2x) of the performance of the Bloomberg Natural Gas SubindexSM for a single day. 

Russian Gas Cuts

With the current inventory levels, it would take an extraordinary set of circumstances for Europe to run out of gas any time soon. Still, there could be some reprieve coming for gas bulls.

Four years ago, Russia and Ukraine signed a five-year pipeline transit agreement to supply natural gas to EU countries. So far, both countries have continued to honor the deal despite war still raging in Ukraine. However, the EU will have to contend with even less Russian gas after Ukraine signaled it has no intention to renew the deal when it expires at the end of the year, while the EU executive says it has “no interest” in pushing to revive the agreement.  Ukraine gas amounts to 5% of total EU gas imports, by no means insignificant.

And now, the EU is warning member countries to prepare for a world where the loss of Russian gas is accompanied by a harsh winter. Aura Sabadus, a senior analyst at the ICIS market intelligence firm, has told Politico that  Austria, Hungary and Slovakia are likely to be the hardest hit when the imports are cut off. The situation is further exacerbated by the recent decision by Berlin to unilaterally tax gas exports, making it harder for these countries to swap Russian imports for supplies coming via Germany, Italy or Turkey.

“We should avoid steps that will damage the work done and strengthen the Russian aggressor,” Czech Industry Minister Jozef Síkela has said of the levy. 

The EU executive says losing Russian supplies through Ukraine may lead to higher transport costs while storage levies imposed between the bloc’s countries could “make this diversification more difficult and costly.”

By Alex Kimani for Oilprice.com

More Top Reads From Oilprice.com:

Global crude oil prices reported a second straight weekly gain and hit six-month high levels as markets watched for signs of any direct conflict between Israel and Iran that could further tighten supplies. This sudden uptick in crude oil prices has reignited fears of inflationary pressures and instilled fresh concerns among global central bankers, policymakers, and investors.

The Brent and US West Texas Intermediate (WTI) crude oil benchmarks rose more than $1 a barrel during trade in the previous session driven by geopolitical tensions. Brent crude settled at $91.17 a barrel, up 52 cents, or 0.57 per cent.

Also Read: Explained | Why are crude oil prices elevated after OPEC+ policy decision and how will it impact India?

US WTI crude finished at $86.91 a barrel, up 32 cents, or 0.37 per cent. Both benchmarks settled on Thursday at their highest levels since October, according to news agency Reuters. Coming to domestic prices, crude oil futures settled 0.03 per cent higher at ₹7,286 per barrel on the multi commodity exchange.

Both global benchmarks, Brent and WTI clocked over four per cent gains this week after oil producing major Iran, vowed revenge against Israel for an attack that killed high-ranking Iranian military personnel, according to reports.

What’s driving crude oil prices?

-Adding to geopolitical tensions, Israel has not claimed responsibility for the attack on Iran’s embassy compound in Syria, according to Reuters. Analysts say that if Iran directly attacks Israel – that’s never happened before – it will be just another geopolitical risk domino about to fall. Iran is the third-largest OPEC producer.

-The ongoing Ukrainian drone attacks on refineries in Russia may have disrupted more than 15 per cent of Russian capacity, a NATO official said earlier last week, hitting Russia’s fuel output, which could lead to global supply risks.

-The Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia, known as OPEC+, this week kept its oil supply policy unchanged and pressed some countries to increase compliance with output cuts. Analysts say that the prospect of a tighter market should see a drawdown in inventories during the second quarter of 2024.

-US job growth soared in March, according to official data released on Friday which also showed a steady increase in wages. The gain of 3,03,000 jobs last month points to likely robust oil demand but potentially delays the anticipated interest rate cuts by the US Federal Reserve later this year.

Also Read: FY24 Review | Brent rises 9% in last 12 months on OPEC cuts, Middle-East tensions; Will crude oil hit $100 in FY25?

-According to analysts at JPMorgan, the global oil demand is expected to grow by 1.4 million barrels per day (bpd) in the first quarter of 2024. This could add to supply risks amid the ongoing geopolitical conflicts in the Middle-East.

-US energy firms this week cut the number of oil and natural gas rigs operating for a third week in a row for the first time since October. The oil and gas rig count, an early indicator of future output, fell by one to 620 in the week to April 5, the lowest since early February, according to Reuters.

Where are prices headed?

Crude oil is getting war premium due to escalating tensions between Israel-Iran. The Chinese economic data released this week is also better than expected and decline in the US gasoline stocks are also supporting crude oil prices. However, a steady dollar index is limiting gains.

‘’We expect crude oil prices to remain volatile. Crude oil is having support at $85.20–84.40 and resistance is at $86.90-87.70. In INR terms, crude oil has support at Rs7,040-6,940 while resistance is at ₹7,215-7,280,” said Rahul Kalantri, VP Commodities, Mehta Equities Ltd.

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Cryptocurrency companies have been increasingly looking to power mining operations in more sustainable and affordable ways, as governments worldwide crack down on energy-intensive crypto operations by introducing more regulations in the sector. We have previously seen companies across the U.S. establish mining operations on existing oil and gas sites, using waste gas from fossil fuel production activities to power mining. But this is getting more and more difficult as the government pursues a green transition and some states introduce strict regulations on digital currencies. Now, many crypto companies are looking to Argentina to set up similar operations and bolster the country’s flailing currency. 

As governments worldwide put pressure on oil and gas companies to decarbonise, many have sought innovative ways to prevent CO2 from being released into the atmosphere. This has largely been supported by the incorporation of carbon capture and storage (CCS) technology into operations. However, some have begun to work with cryptocurrency companies that are seeking to use waste energy from gas-flaring activities to power digital currency mining. Previously, gas released from flaring on oil sites was not captured and reused, as it was deemed to not be economically viable. Governments are increasingly calling on oil and gas companies to stop highly polluting flaring practices. However, many companies are finding an alternative solution by letting crypto companies use their waste gas. 

Some of the first of these operations took place in 2019, when Giga Energy Solutions signed agreements with several oil and gas producers in East Texas to use their waste energy. Giga puts shipping containers filled with thousands of Bitcoin miners on an oil well, diverting the natural gas into generators. This gas is then transformed into the electricity that is used to power the miners. This helps oil and gas companies reduce their emissions by around 63 percent compared to conventional gas flaring activities.

Now, Giga is looking to expand its crypto-mining operations into new markets. The Mendoza province in Argentina is home to the world’s second-largest shale gas reserve – Vaca Muerta, which could provide immense quantities of waste energy to be used by digital currency miners. In March, Giga announced plans to expand into Argentina following the successful rollout of operations across the U.S. and its entrance into Shanghai. It will partner with the oil and gas company Phoenix Global Resources, as well as the IT services company Exa Tech, to develop a 2 MW project on Vaca Muerta. 

This will help the oil and gas producers both reduce emissions as well as turn waste into something valuable. Brent Whitehead, the co-founder of Giga, explained “By capturing stranded natural gas to power modular data centres for energy-intensive computing, Giga is actively contributing to reducing global methane emissions.” 

Argentina has been battling an economic crisis with an inflation rate that rose above 211 percent in December, according to official data. This marked the highest inflation level since the 1990s. The country’s libertarian President Javier Milei has been hoping to avoid hyperinflation through strict austerity measures. In December, the new government devalued the peso currency to try and tackle inflation. 

As the country has faced greater financial insecurity, with a highly volatile currency, the government has increasingly embraced digital currencies in recent years. Milei is seen as a crypto-friendly President and at the end of last year, the government “ratified and confirmed” that contracts can be set in Bitcoin. Grayscale Investments stated, “Milei sees Bitcoin as a crucial tool in countering the inefficiencies and corruptions of centralised financial systems.” If Argentina is seen to welcome cryptocurrency, this could encourage other countries in the region to follow suit. 

In addition, while Bitcoin has had its ups and downs in recent years, its value has increased by 170 percent over the last six months and has touched several all-time high prices, making it very attractive. Giga has achieved revenues of over $10 million so far this quarter, according to the co-founder of the company Matt Lohstroh. Giga plans to launch small-scale operations before expanding. The company expects to eventually reduce carbon emissions by around 30,000 tonnes a year at the Vaca Muerta upstream facility, with excess power being sold to the Argentinian grid. 

However, it is not the only crypto company looking to develop operations in Argentina, which is one of the biggest methane emitters globally. There is a huge opportunity to develop crypto mining operations in Argentina, particularly under the leadership of a pro-crypto president. Giga will likely be one of many crypto companies to enter the Argentinian oil and gas market over the coming years with companies such as these offering a win-win scenario for fossil fuel companies.  

By Felicity Bradstock for Oilprice.com

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