LNG: Supply Drives Divergence In EU/US Gas Prices

European and US gas diverged on Monday. US President Trump’s decided to bring forward the deadline for an end to Russian hostilities in the Ukraine otherwise there would be punitive tariffs on it and those who buy its fossil fuels. This drove European prices 1.9% higher to EUR 33.12 after an intraday low of EUR 31.99, driven by the deal to buy US energy, and it is now 3.8% off the July 25 low and slightly higher this month. 

• Trump said that he would bring the deadline forward to 10-12 days from July 28. He appears to have lost patience with Russian President Putin saying he’s “not so interested in talking any more” after the latter has said one thing and done another. Trump said that he’ll likely make an announcement Tuesday. The original deadline was September 2.
• While pipeline flows from Russia to the EU are almost nil, LNG imports remain high as it refills storage, although the EU is aiming to phase them out completely. It agreed to buy $750bn of US energy over the remainder of Trump’s term.
• Pipeline flows from Norway remain close to capacity after maintenance and LNG imports in July are +39% y/y, according to Inspired Plc and Bloomberg.
• US prices in contrast fell 2.5% to $3.03 after reaching a low of $2.984, the lowest since early November and below July 2024. An expected mild start to August and continued robust supply have pressured prices this month and they are now down 12.3%. The August Henry Hub contract expires Tuesday.
• Bloomberg reports that China’s demand rose in July with LNG imports likely to be in line with July last year after lower levels over the last eight months. 

TYU5 is trading 110-27, up 0-02+ from its close. 

• The US 2-year yield opens around 3.912%, down 0.01 from its close.
• The US 10-year yield opens around 4.405%.
• MNI US DATA: Mixed Ability Of Firms To Pass Cost Increases On In Dallas Fed District. The improvement in the Dallas Fed manufacturing survey for July came despite an apparent relative re-compression in margins although this in turn was countered by the opposite when looking six months out.
• (Bloomberg) -- The US Treasury estimates $1.01 trillion in net borrowing for July through September, up from the $554 billion it had estimated in April. The Treasury is ramping up issuance to rebuild its stockpile of cash after Congress raised the debt ceiling by $5 trillion at the beginning of this month.
• The 10-year yield has moved back towards its pivot within the wider range 4.10% - 4.65%, decent supply was seen around 4.30/35% first up. A decent bounce was seen off this support but the move has failed to follow through above 4.40% for now. The Data this week should hopefully provide more clarity going forward.
• Data/Events: Advanced Goods Trade Balance, FHFA House Price Index, S&P Corelogic, JOLTS, Conf. Board Consumer Confidence, Dallas Fed Services Activity.

Gold prices fell 0.7% to $3314.61/oz on Monday as trade risks dissipated with the US-EU trade deal and the start of US-China talks in Stockholm. The higher US dollar (BBDXY USD +0.8%) and US yields also pressured bullion. It is now only 0.4% higher this month and down 3.6% from the July 22 peak. Gold has started today slightly lower at $3312.8.

• Trade is just one event this week that could drive direction. There are also the Fed’s decision on July 30, Q2 GDP & June PCE July 30 & 31, and US July payrolls August 1. A dovish Fed or weak US data would be supportive of gold prices.
• Bullion fell to a low of $3301.85, below initial support at $3323.2 (50-day EMA), before recovering somewhat. The bear trigger is at $3248.7 but short-term weakness continues to be seen as corrective. Moving average studies are still in a bull-mode position highlighting the dominant uptrend. Initial resistance is at $3439, 23 July high.
• Silver was flat on Monday at $38.169 and has started today in line with this. It is up 5.7% this month and trend conditions remain bullish. Initial resistance is at $39.655 with support at $37.809, 20-day EMA. The sequence of higher highs and higher lows continues.
• Equities were mixed with the S&P flat but Euro stoxx down 0.3%. Oil prices rose sharply following news of US pressure on Russia to stop fighting in Ukraine. WTI rose 2.8% to $66.98/bbl. Copper fell 2.9%.