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Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow

U.S. and European natural gas markets are really heating up ahead of cooler weather, as Scotiabank analyst Holly Stewart reports.

“The September 2021 [futures] contract settled on Friday at $4.37/mmBtu, placing the 3Q21 average Nymex price at $4.01/mmBtu, the highest since 3Q14 … With [the 2023 contract] at $3.09/mmBtu, we believe producers are actively locking in pricing, with private operators likely considering some moderate growth plans. Even as pricing has risen, the natural gas rig count remained steady last week at 97.”

Ms. Stewart focuses on U.S. companies and has sector outperform ratings on Cabot Oil and Gas, EQT Corp. and National Fuel Gas Co.

“@SBarlow_ROB (BNS) U.S. nat gas markets heating up ... " – (research excerpt) Twitter

“@JavierBlas Anyone in London / Brussels / Berlin / Paris / Madrid / Rome paying (any) attention? “We face an extreme situation this winter with the threat of really not having enough gas for the Western European markets,” said Harald Herzig, head of trading at German utility Mainova.” - Twitter


BMO economist Sal Guatieri highlighted the outsized influence on Canadian GDP and the industry’s role in the recent GDP miss.

“After exports, a key driver of Canada’s Q2 GDP contraction was a 12.4% (annualized) dive in residential construction. Despite more home building and renovation spending, the segment fell due to a retreat in ownership transfer costs, as sales pulled back from record heights. The report is a timely reminder that the housing sector (or at least residential construction) is now such a large slice of GDP (10.1%, 4.2 ppts above the long-run mean), that it’s likely to act as a drag for some time. Towering nearly 21% above late 2019 levels, the sector is poised to contract in the year ahead as sales moderate in response to fading affordability and as activity corrects from the Stratosphere.”

" @SBarlow_ROB BMO: “Housing’s Heavy Weight on Canadian GDP”” – (research excerpt) Twitter


There have been a lot of people, including me, touting the bullish long-term outlook for copper prices as economic growth resumes and because copper plays a central role in the de-carbonizing of growth. Citi reports, however, that slowing Chinese demand is throwing a wrench into this thesis.

“The China Copper End-Use Tracker (CCET) was +1.5% y/y in July 2021. This is equivalent to +7% y/y on 2019 levels which is down from a +10% average in 1H’21 (vs 2019) and an even steeper decline from +12% in June. In level terms we estimate this represents a ~0.5Mtpa [million tonnes per year] (seasonally-adjusted) decline in copper consumption compared to 1H’21 levels and ~0.6Mtpa decline compared to June (equivalent to -1.5% and -2.0% of total global copper consumption respectively)… The weakest copper end-use sector in China for a 3rd consecutive month was the cooling and air-con sector. Broader appliances and the building and construction sector also slowed notably… The outlook for Chinese building and construction appears to have softened in particular and is increasingly dependent on policy easing. A generally tightening trend of policy could however transition to more targeted easing in response to a faster than expected slowdown.”

“@SBarlow_ROB Copper demand slowdown in China (Citi)” – (research excerpt) Twitter

“China Economist Warns of Falling Property Prices, Debt Pressure” – Bloomberg


Diversion: “What Is the Most Important Scientific Development of the Last 50 Years?” – Gizmodo

Tweet of the Day: " @JKempEnergy CHINA’s manufacturers have reported a deceleration in growth over last six months, especially last four. Official purchasing managers’ index fell to 50.1 in Aug (28th percentile for all months since 2011) down from 51.0 in May (61st percentile) and 51.9 in Mar (91st percentile)” – Twitter

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