The number one thing the world has to be thankful at the turn of the year is good weather in Europe, and to a lesser extent North America.
Europe is a weather trade right now and the forecast is good. November was remarkably warm in Europe, December had a short-lived cold snap but the next two weeks are warm.
Europe GEFS (GFS Ensemble) temperature anomaly 06z forecast for Dec 30 to Jan 15 from Pivotal Weather. #Natgas https://t.co/wwPYcRG9BL pic.twitter.com/DvYON9AABd
— RonH (@Ronh999) December 30, 2022
Beyond that, it’s anyone’s guess but even with what’s happened already, European energy storage will hold up. In North America, a light hurricane season didn’t disrupt energy and after the Christmas travel havoc, the next week or so is set to be balmy.
The investing theme for the decade is energy. The global challenge this decade is to deliver cheap, reliable and increasingly clean energy. It’s a staggeringly difficult task and I’m skeptical that it will happen in the kind of timeline that anyone wants but every day of warm winter weather is a bonus.
The problem for Europe is that this isn’t just a 2022 problem or 2023 problem. The LNG cavalry doesn’t arrive until 2025 or 2026 and by that point, European government budgets will be in shambles.
The euro and pound certainly aren’t expensive but there’s no reason to buy them unless there’s some kind of dramatic change in Russia. Competitiveness is being eroded daily by high energy costs and inbound long-term investment is nil.
A much better trade on shifts in global trading patterns is in the Mexican peso or Mexican assets in general.
