FT : West Texas gas price falls below zero as pipeline outages trap supply

West Texas gas price falls below zero as pipeline outages trap supply
Negative values in Permian Basin come as Europe contends with sky-high cost of fuel

The spot price of natural gas in west Texas has fallen below zero, effectively forcing producers to pay to unload it, even as Europe contends with sky-high costs for the fuel.

The negative price of gas comes as surging production in the Permian Basin region butts up against pipeline constraints. Outages at liquefied natural gas terminals used to export US gas overseas have also curtailed shipments.

Gas for next-day delivery at the Waha trading hub dropped as low as minus $2.25 a million British thermal units on Tuesday at the Intercontinental Exchange, according to S&P Global. The plunge into negative territory contrasted with a daily rise of more than 7 per cent in benchmark US gas futures, to $5.585 a mn Btu. The main benchmark for European gas was €98 a megawatt hour, or $28 a mn Btu.

“Basically you have too much production [and] you don’t have enough avenues to get that production out,” said Stephen Schork, an industry analyst, of the negative price at the Waha hub. “You have to pay people now to take this production away from you.”

Analysts said the price differences underlined the regional segmentation of gas markets.

The Freeport LNG terminal on the coast of Texas, one of the country’s biggest export facilities, has been out of service since a fire in June, removing a demand outlet for US-produced gas.

The regional glut has been exacerbated this week by scheduled maintenance on the Kinder Morgan-operated Gulf Coast Express and El Paso Natural Gas pipelines, which carry gas from away from the Permian Basin. The maintenance is expected to last a few days, according to Mark Callahan, director of Americas natural gas and power price reporting at S&P Global Commodity Insights.

Prices for immediate delivery have also declined sharply in Europe in recent days as storage sites are near capacity. Unseasonably warm weather has forced traders to offload supplies despite concerns about shortages this winter.

European benchmark Dutch TTF gas futures are well below levels of more than €300 a MWh in August, but still well above a range of €20 to €40 in that they have largely traded for the past decade.

It was not the first time that prices at Waha have turned negative: they did so nine times in 2020 and 31 times in 2019. But this time the move has occurred as Europe braces for potential winter shortages as Moscow cuts supplies in retaliation for western sanctions.

Natural gas from the Permian Basin comes largely as a byproduct of oil production. Volumes are set to reach more than 21bn cubic feet a day by the end of November, according to the Energy Information Administration, a record high and up by 9 per cent since last year.

Environmentalists said the recent plunge in local prices could encourage operators to flare more surplus gas, burning it at well sites and releasing carbon dioxide straight into the atmosphere.

“We expect this will lead to an unfortunate increase in flaring in the Permian in the short term,” said Jon Goldstein, senior director of regulatory and legislative affairs at the Environmental Defense Fund.

“Wasting these energy resources is especially galling right now as the US is rightfully looking to do all it can to help get our European allies off Russian natural gas given the ongoing crisis in Ukraine.”

>>> US After Hours Summary: Big tech names lower on earnings: GOOG -6.7%, TXN -5

After Hours Summary: Big tech names lower on earnings: GOOG -6.7%, TXN -5.7%, SPOT -5%, FFIV -3.6%, MSFT -3.1%; CMG -1.8% also lower; JNPR +3.9%, V +2.5% higher on earnings

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: WFRD +8.8%, UHS +7.8%, MXL +6%, CHX +5.7% (also increases share repurchase authorization to $750 mln), ENPH +5.4%, WIRE +4.6%, TENB +4.4%, EQC +4.3%, JNPR +3.9%, CC +3.3%, TNET +3.1%, V +2.5% (also announces new buyback, dividend hike), CNI +1.7%, TER +1.7%, NCR +1.1%, MTDR +1%, TRMK +0.8%, FE +0.6%, LXFR +0.6%, BYD +0.3%, AXTA +0.2%, BXP +0.1%, EGP +0.1%, FCF +0.1% (also increases dividend)

Companies trading higher in after hours in reaction to news: ET +1.1% (increases dividend), MDLZ +1% (announces next phase of its Cocoa Life program, backed by an additional $600 mln through 2030), GTY +0.2% (increases dividend), BHVN +0.1% (announces advancements in the development of its MoDE extracellular target degrader platform technology)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: LRN -16.8%, AMP -13%, SKX -10.9%, NEX -10.7% (also authorizes new $250 mln share repurchase program), VICR -7.4%, GOOG -6.7%, TXN -5.7%, AIZ -5.7%, SPOT -5%, MAT -4.5%, CB -4.3%, FFIV -3.6%, MSFT -3.1% (Azure slightly below prior guidance), HA -2.9%, CMG -1.8%, KRC -0.3%, HIW -0.2%, EQR -0.1%

Companies trading lower in after hours in reaction to news: TSHA -12.8% ($30 mln stock offering), CANO -2.8% (Daniel S. Loeb's Third Point lowers active stake to 3.45%), POR -1.7% (commences $375 mln share offering), DKL -0.1% (increases dividend)

>>> US Close Dow +1.07% S&P +1.63% Nasdaq +2.25% Russell

Closing Stock Market Summary

Today's trade was distinctly positive as the major averages built on recent gains. A big pullback in Treasury yields precipitated broad buying interest in the stock market. The 10-yr note yield fell 13 basis points to 4.11% and the 2-yr note yield fell two basis points to 4.46%. The S&P 500 closed well above the 3,800 level after dipping below 3,500 on October 13.

The moves in the Treasury market followed some weak-looking home price data for August that was contained in the FHFA Housing Price Index (-0.7% m/m) and the S&P Case-Shiller 20-City Composite Index (+13.1% yr/yr, but down from +16.0% yr/yr in July). Those reports supported market participants' growing belief that the Fed may soften its approach after the November meeting.

To be fair, buying momentum in the Treasury market lost some of its vigor following the weak 2-yr bond auction, which saw a high yield of 4.46% tail the when-issued yield by 1.2 basis points. The stock market, however, remained on a steady incline. 

Favorable quarterly results from names like Coca-Cola (KO 58.95, +1.38, +2.4%), General Motors (GM 37.01, +1.29, +3.6%), and Sherwin-Williams (SHW 220.20, +7.67, +3.6%) added fuel to the rally effort. 

Mega cap stocks had a strong showing, offering addition support to the broader market. The Vanguard Mega Cap Growth ETF (MGK) closed up 2.3% versus a 1.6% gain in the S&P 500. 

Ten of the 11 S&P 500 sectors logged gains on the day led by the real estate sector (+3.9%). The energy sector (-0.1%) was alone in negative territory despite a modest increase in oil prices. WTI crude oil futures rose 0.4% to $84.97/bbl.

Small and mid cap stocks fared better than their larger peers today. The Russell 2000 (+2.7%) and S&P Mid Cap 400 (+2.5%) showed some of the biggest gains among the indices. 

Ahead of Wednesday's open, Automatic Data (ADP), Boeing (BA), Bristol-Myers (BMY), General Dynamics (GD), Harley-Davidson (HOG), Hilton (HLT), Kraft Heinz (KHC), Norfolk Southern (NSC), Roper (ROP), Seagate Tech (STX), Waste Mgmt (WM) headline the earnings reports.

Market participants will receive a slew of economic data tomorrow that includes:

  • 7:00 ET: Weekly MBA Mortgage Index (prior -4.5%)
  • 8:30 ET: September advance goods trade deficit (prior -$87.30 bln), September advance Retail Inventories (prior 1.4%), and September advance Wholesale Inventories (prior 1.3%)
  • 10:00 ET: September New Home Sales (consensus 575,000; prior 685,000)
  • 10:30 ET: Weekly crude oil inventories (prior -1.73 mln)

Reviewing today's economic data:

  • August FHFA Housing Price Index -0.7% ( consensus -0.7%); Prior -0.6%
  • August S&P Case-Shiller Home 13.1% ( consensus 14.0%); Prior was revised to 16.0% from 16.1%
  • October Consumer Confidence 102.5 ( consensus 105.5); Prior was revised to 107.8 from 108.0
    • The key takeaway from the report is that consumers' concerns about inflation picked up again in October on the back of rising gas and food prices.

Dow Jones Industrial Average: -12.4% YTD
S&P Midcap 400: -16.1% YTD
S&P 500: -19.0% YTD
Russell 2000: -20.0% YTD
Nasdaq Composite: -28.4% YTD

>>> US Notable earnings/guidance movers: MXL +10.4%, EQC +4.3%, CMG +3.6% on ups

Notable earnings/guidance movers: MXL +10.4%, EQC +4.3%, CMG +3.6% on upside; AMP -13%, SKX -10.9%, SPOT -7.1%, TXN -6%, GOOG -5.7%, FFIV -3.6%, MSFT -2.3% on downside

  • Earnings/guidance gainers: MXL +10.4%, EQC +4.3%, CMG +3.6%, CC +2.4%, TENB +2.2%, CSGP +2.1%, WIRE +2%, BYD +1.6%
  • Earnings/guidance losers: AMP -13%, SKX -10.9%, SPOT -7.1%, TXN -6%, GOOG -5.7%, HA -5.6%, NEX -5.4%, VICR -5%, MAT -4.4%, FFIV -3.6%, CNI -3.5%, MSFT -2.3%, TER -2.1%

WSJ : Sanctioned Russian Oligarch Alexey Mordashov Finds Safe Harbor for Yacht i

Sanctioned Russian Oligarch Alexey Mordashov Finds Safe Harbor for Yacht in South Africa
The country’s government will allow the steel magnate’s superyacht Nord to call in Cape Town, despite outcry from city’s mayor

South Africa will allow sanctioned Russian steel magnate Alexey Mordashov to pull his superyacht into Cape Town, making it the latest port stop on a controversy-laden voyage that shows the limits of Western sanctions.

The journey of the 465-foot Nord—from the Seychelles to Vladivostok in Russia, Hong Kong and now en route to Cape Town—has become a closely watched barometer for the effectiveness of U.S. and European sanctions on its owner, Mr. Mordashov, one of Russia’s richest men and the largest shareholder of Severstal PAO, among the world’s biggest steelmakers.

Mr. Mordashov is under U.S. and European Union sanctions put in place after Russia invaded Ukraine. Western capitals have accused a coterie of rich Russian business people of being close to President Vladimir Putin and being complicit in the invasion.

Mr. Mordashov has said he has never been close to politics and didn’t see how sanctioning him would help end the conflict.

Shortly after Russia invaded Ukraine in late February, the Nord, which features two helicopter pads, a swimming pool and a cinema, set sail from the Seychelles to the far-eastern Russian port of Vladivostok, where it arrived in March. The move protected the yacht from the fate of Mr. Mordashov’s smaller boat, the 213-foot Lady M, which was seized by Italian authorities that same month.

In early October, the Nord left Vladivostok and anchored in the waters of Hong Kong, prompting a rebuke from the U.S. State Department. A State Department spokesman warned that allowing Mr. Mordashov’s yacht to moor near Hong Kong’s Victoria Harbour called into question the Chinese-administered territory’s reputation as a financial center.

China’s Foreign Ministry in Hong Kong in return accused the U.S. State Department of smearing Hong Kong’s business environment.

The Nord set sail again last week, crossing the Strait of Malacca on Monday. It is set to arrive in Cape Town on Nov. 9, according to publicly available maritime-tracking data.

Reports on the yacht’s destination prompted the mayor of Cape Town, Geordin Hill-Lewis, to appeal to South Africa’s government on Monday to block the Nord from docking at the port. “South Africa has a moral duty to do what it can to protest unjust war, state terrorism, and the gross violation of human rights,” said Mr. Hill-Lewis, a member of the Democratic Alliance, the largest opposition party to the ruling African National Congress.

Cape Town, famed for its sandy beaches, Table Mountain and nearby vineyards, is home to several marinas and harbors that regularly host luxury yachts.

In written comments to The Wall Street Journal, Mr. Hill-Lewis said Tuesday that he had received conflicting reports over whether Mr. Mordashov was on board the vessel.

“I believe Mr. Mordashov…is seeking safe harbor for his assets and potentially himself,” Mr. Hill-Lewis said. He said he was concerned his city could become “a new favorite destination for Russians fleeing sanctions in the rest of the world.”

A spokeswoman for Mr. Mordashov said he isn’t on the ship and remains in Moscow. She declined to comment on whether he plans to visit South Africa in the near future.

The government of South Africa, whose ruling party has fostered close ties with Russia dating back to the Soviet Union’s support of the ANC’s struggle against apartheid, said the vessel would be allowed to dock in South African waters. Vincent Magwenya, spokesman for South African President Cyril Ramaphosa, said there was no reason to block the yacht or Mr. Mordashov from entering South Africa.

“South Africa has no legal obligation to abide by the sanctions that the U.S. and the EU have decided to impose within specific jurisdictions,” Mr. Magwenya said. “For as long as individuals abide by our immigration laws we have no reason to prevent their entry into South Africa.”

Mr. Ramaphosa has tried hard not to get caught up in the intensifying confrontation between Russia and the West over the war in Ukraine. South Africa isn’t participating in Western sanctions and has abstained in United Nations votes on the invasion. It has called for U.N.-led peace talks to end the fighting.

Luxury-yacht experts say the Nord’s ocean-spanning travels highlight another dilemma faced by their sanctioned owners: The world has few ports able to maintain yachts of the Nord’s size, and those are mostly in Europe, where they would quickly be seized.

“As soon as you stop maintaining them, they fall into disrepair, and the cost of getting it out of disrepair is astronomical,” said James Jaffa, a partner at a U.K.-based law firm that advises clients on superyachts.

FT : Lithium miner to create US-listed company as shortages hit electric cars

Lithium miner to create US-listed company as shortages hit electric cars
Australia-listed European Lithium will merge with Sizzle Acquisition

A lithium mining start-up is to create a US-listed company in a blank-cheque merger as a severe shortage of the metal has become the most serious supply chain bottleneck in the rollout of electric vehicles.

European Lithium, which claims to have the region’s first fully licensed lithium mine with deposits in Austria, is to merge with Sizzle Acquisition, a special purpose acquisition company, to create Critical Metal.

European Lithium, which is already listed in Australia and will continue to trade there, will become the largest shareholder in Critical Metals, which will have a market capitalisation of $972mn.

Other companies have struggled to get permits to mine the metal in Europe, partly because of environmental concerns.

Europe’s setbacks in developing lithium supplies have left it largely reliant on China, which could pose problems for the region’s carmakers as they rush to secure local battery materials. China controls 60 per cent of global lithium processing.

The deal comes during a severe shortage of the metal with prices plateauing close to record highs of $70,000 a tonne, eight times their level at the start of 2021.

This followed electric vehicle sales in China powering ahead this year with the supply of the metal struggling to keep pace.

The problems over winning permits have held back lithium mining in Europe.

Rio Tinto’s Jadar project in Serbia had its exploration licences revoked, while Savannah Resources has yet to get environmental approval for a lithium development from authorities in Portugal.

Lithium is a vital element in electric vehicle batteries because it is lightweight, with demand expected to multiply several times over the next decade as the EV industry takes off.

“The need for additional battery-grade lithium in Europe will only continue to accelerate as demand for EVs continues to outstrip supply,” said Critical Metals’ executive chair Tony Sage.

The Wolfsberg site, located 270km south of Vienna, is expected to produce about 10,500 tonnes of lithium concentrate a year starting in 2025 — enough for 200,000 EVs. Lithium concentrate has to then be refined into chemicals that can be used in EV batteries.

The high lithium prices have been spurring a wave of activity to raise capital to develop mines. On Monday, mining solutions group Imerys said it was launching a lithium project in France that aims to produce 34,000 tonnes of lithium hydroxide a year from 2028.

European Lithium holds a memorandum of understanding with Germany’s BMW to pre-pay $15mn in return for lithium in the future. General Motors, Ford and Stellantis have taken the rare step of pre-financing mines and taking equity stakes in early stage mining groups.