Main take aways:

• Long utilities in Europe
• OPEC looks like losing control with the market
• SPR purchases could floor Oil markets here

Happy Monday from Copenhagen everyone. Last week wasn’t the best in terms of our trades in the energy space after an otherwise strong year in our tactical bets placed within the sector.

We have been stopped out of our natural gas trade and our crude oil long is now in the red. Not a pretty week to say the least as disinflationary/recessionary sentiments take control. We still like natural gas in Europe but we are keen on moving away from the volatility of being outright long TTF hence Utilities are an interesting bet given their ability to pass on prices. A long low beta equity position will also work well in a portfolio where rate cuts are being priced in but haven’t spilled over to equity space.

Let’s start with the reasoning behind utilities seeing higher prices. We sent our gratitude to Olaf Scholz last week given that the German coalition reached a deal on the 2024 budget. Scholz spoke at a party congress last week, promising that the deal will go through and we feel certain that giving a much needed life line to Germany’s ailing industry will see electricity consumption rise.

Chart 1: Scholz helping hand to the energy intensive industry