Bubbles: Natural Gas, LNG, Coal and Lithium

Anecdotally, the most euphoric noise that I hear globally surrounds three markets, being LNG, Thermal Coal and Lithium/Spodumene.

Especially amongst gas prices, I can’t hear anyone making a case for a moderation of prices.

The herd is all huddled together on the same life rafts.

Sure, prices can go higher but I dare you to initiate a new ‘long’ position.

My commentary is to heed warning.

The technicals and the spikes in price action are pointing to extremes which I think provide a terrible risk/reward skew for any recent or new entrants to these markets.

Producers and Sellers of such commodities would be well advised to lock in prices.

Buyers should elect taking a calculated risk of probability and not commit to fixing in those higher prices.

Owners of listed securities exposed to these sectors are doing themselves an injustice if they are not acknowledging the speculative fervour, let alone pondering taking the ‘fat part of the trade’.

The charts below show prices being Overbought, trading to 3 standard deviations and stratospheric miles above their 200 week moving averages.

Although one day doesn’t make a season, the Dutch TTF Natural Gas and Japan/Korean LNG Market prices are down 25% and 15% respectively, thus far, thus week.

August 31, 2022

by Rob Zdravevski

rob@karriasset.com.au