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9 Jan 19 2011 @ 10:09am by Matt Smith in Global Energy, Natural Gas, UK natural gas

Bringing It All Back Home (to Energy) – Bob Dylan And Current Markets

I know this is going to sound weird, but the other day I had a craving for some harmonica. It was like the craving I get for a decent curry or (the very occasional, ahem) glass of red wine. So the first place I turned to quench my harmonica thirst was Robert Allen Zimmerman (aka Bob Dylan). And it was while looking through a bunch of his songs that I inevitably saw a path back to energy…  

A Hard Rain’s A-Gonna Fall
There have been catastrophic floods in the last few weeks in various countries including Brazil, Sri Lanka, and the Philippines. But none have seen as dramatic an impact as the floods experienced in Australia. Its implications are expected to cut the country’s GDP by up to 1% (‘whacking’ the nation’s economy), while its effect on energy is set to be more wide-ranging. Australia accounts for two-thirds of global coking coal trade, exporting 70% of what they produce – making them the world’s largest exporter of seaborne coal. Two weeks after the initial torrential rains, and only 15% of Queensland’s 57 coal mines are fully operational, while 25% are yet to resume operations. So what is the knock-on effect? Coal prices have reached a two-year high at Australian pricing points, and are likely to remain elevated while uncertainty reigns as to when normal operations at ports and mines will resume. However, with European pricing not immediately impacted and China having high stockpiles, global prices are likely to experience ripples going forward, rather than spikes.

As an aside, at the same time that Australia has experienced its worst floods in 50 years, Nordic power prices have hit record highs (on a day-ahead basis) as reservoir levels are at 30-year lows due to a lack of precipitation this winter. Which doesn’t sound all that disastrous, except that over half of the region’s power supply comes from hydro-power (now it sounds disastrous). And all of these outliers are occuring on the watch of a certain weather pattern, leading to the question: Is La Niña is the new Black Swan?.

 
Tangled Up In Blue 

Jan 23-27 (as of Jan 18)

It was this song that kicked off my train of thought. Weather outlooks in the US are currently tangled up in blue, with key consuming regions seeing consistently below-normal temperatures. But despite the colder temperatures (and the increasing heating demand they bring), natural gas prices are failing to form any sort of sustained rally, as storage remains stout, and supply remains staunch. Prompt month continues to be rangebound, gravitating back to the $4.50 area time and time again, while the forward calendar strips continue to flatline, and have done so for the past quarter or so. My point being: despite weather outlooks being tangled up in blue, a blue streak is not being established.  

When The Ship Comes In
It’s amazing really how market dynamics can change so quickly; and although I’m talking natural gas, I’m not talking about the “S-word” (= Shale), but the dynamics of the UK natural gas market and LNG. Multiple cargoes of the stuff continue to arrive in Britain each week, supplying over 50 mcm per day on average in 2010 (= approx. 17% of supply), and we have seen volumes spike in 2011, as colder temperatures in December drove up demand and depleted storage. We spoke about NOT PANICKING here on the burrito last month, and a 10% fall on the prompt month has validated this call for calm. There has been little more soothing for prices recently than the LNG ships coming in:  

LNG imports into the UK

By the way; it worked….‘Just Like A Woman’ ended up satisfying my harmonica appetite (…absolute genius). If you think there is a better harmonica solo, feel free to post in the comments. Best one wins a prize.

9 Comments on this post:

  1. Kevin Janes says:

    I like the live 1974 version of “Don’t Think Twice, It’s Alright” from the double-live album Before The Flood – Bob Dylan & The Band.

    Bob took the stage alone on this one, and the harmonica sounds downright ferocious and the vocals as urgent as you’ll ever hear him sound, sort of like if Johnny Thunders were a folksinger.

  2. James Grasso says:

    Matt…I’m still awaiting your reply to my nat gas questions from three posts ago…has the Sherpa been forgotten? While more of an intro than solo, I would submit the harmonica intro from Journey’s Raised on Radio for your consideration.

  3. Matt Smith says:

    Thanks for the responses guys! And no, Mr Grasso; the Sherpa has not been forgotten…I am on the case!

  4. carlos ruffino says:

    well glad to see someone has finally incorporated the brilliant lyrics of my favorite songwriter, poet and philosopher with regards to energy commodities.

    what about incorporating something “that is blowin’ in the wind”?

    need to review the harmonia licks; i think there is a better one out there.

  5. Garrett Taylor says:

    Very clever Mr. Smith! I was leaning towards suggesting Elton John and his “I guess that’s why they call it the blues” but you stole my thunder on tying it to the weather outlook. So for my submittal I’ll use another British band, Led Zeppelin and their “Bring It on Home” for the wrap up post to this great thread you’ve started.

    Please note, the attempt to bias your selection with English selections was intentional.

  6. PDX says:

    Gotta’ go with Little Walter’s “My Babe”

  7. Truett Asti says:

    Blues Traveler… just pick any song and you will find a way better harmonica solo than Bob Dylan… please.

  8. Ginny Keeney says:

    Aerosmith – Cryin’ (Harmonica solo by Steven Tyler)

    Bob Dylan is a wonderful poet. Don’t care to hear him perform though.

  9. Glenn Poole says:

    My favorite Dylan song – Positively 4th Street – perhaps you could somehow tie that back in to a Wall Street comment – It starts out with “You got a lot of nerve to say you are my friend ”
    Seems like an easy connection!

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