Schrödinger’s gas crisis
Europe’s energy emergency is simultaneously alive and dead | EU LNG Chart Deck: 11-28 Mar 2024
In quantum mechanics, the principle of ‘superposition’ asserts that a system can exist simultaneously in multiple states until observed. The principle was popularised by Austrian physicist Erwin Schrödinger’s eponymous thought experiment, in which a cat in a box is simultaneously alive and dead. The act of opening the box and observing the cat collapses the quantum superposition into a definite reality.
Europe’s gas crisis is in a superposition of being simultaneously completely over and still raging. But unlike Schrödinger’s cat, observing the state of the market does not collapse the superposition into any definite reality: the facts are open to interpretation, and are always changing. The ‘crisis’ of running an industrialised economy on natural gas after depriving it of its primary supply of the fuel never really goes away. Abundant flows of liquefied natural gas (LNG) merely shift the dependency. The market is thus in a state of permanent superposition.
This week’s EU LNG Chart Deck takes a quantum scalpel to today’s apparently benign market conditions, and explores some of the unobservable risks inherent in Europe’s pivot from Russian pipeline gas to global supplies of LNG.
As usual, this post is packed full of charts and looks a lot better on the website (preferably on a desktop browser). Here’s a quick rundown of the chart titles and discussion themes:
Asia’s demand bump triggers automatic reply from Europe’s liberalised markets
TTF futures bounce on Asian LNG rally
Keep it in the ground (for next winter)
TTF calendar spreads still positive
Back to the future of global LNG trade
JKM futures jump above TTF on market bifurcation
The DQT window is closing
The narrowing cost differential of oil-indexed LNG to spot
The ‘cat’ is playing dead
Norway’s oil/gas trade-off
TurkStream goes gangbusters
Russia pounds Ukrainian energy infrastructure
Conclusion: Nothing is ever truly as it seems
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Now, let’s take a peek inside Schrödinger’s box…