According to the external review, the energy plate has recently become the focus of the market again, with three main lines behind it: the Iranian conflict disrupting supply in the Middle East, the low level of natural gas stocks in Europe, and the additional electricity demand generated by the AI data centre. The article also mentions that part of the U.S. energy unit is thus continuously configured by hedge funds.

European gas inventory pressure

According to the article, the European energy market has been tight since the events of the North Creek pipeline in 2022. This summer, high temperatures pushed up electricity demand and further depleted natural gas stocks. In the case of Germany, the current level of gas storage is lower than the same period last year and is also below the rolling mean range.

Foreign sources mentioned that Europe plans to end Russia’s LNG imports by the fall of next year, but that transition is not easy in the face of low stocks and uncertainty about winter needs. If winter temperatures are low, Europe may need to be more active in procuring additional sources of gas.

The article also stated that European demand for LNG had been in favour of United States exporters, but market discussions had shown that part of the United States LNG supply might have shifted to Asia. One of the reasons for this is that the Iranian attack has led to the de-linking of some of the Qatar LNG supplies and that Asian buyers are competing for available cargo.

The price of diesel and California fuel went up.

According to the article, the price of diesel in the United States remains high. AAA data show that the national average price of diesel has risen to $5.47 per gallon, close to the high of $5.81 in June 2022. Piper Sandler mentioned that last week there was a reduction of 500,000 barrels of diesel and aviation fuel stocks, and that this point should normally be even or up.

The price rise was partly attributed to the Iranian conflict and the Russian-Uu war, and it was argued that these two factors led to the de-lineation of some of the global refined oil production capacity and the tightening of the supply of finished oil.

The article also singles out California as a focus of observation. Local gasoline prices are long higher than the United States-wide average and, in addition to higher taxes, inadequate refining capacity is a major cause. Over the past year, two major refineries have been lost in California, making external fuel imports even more important.

Plumbers and electricity infrastructure are of concern

In this context, the article refers to a pipeline project called Western Gateway. The project, facilitated by Phillips 66, HF Sinclair and Kinder Morgan, plans to connect the existing pipeline network to parts of Los Angeles and the central and western parts of the United States. According to external sources, this project, if landed, could ease fuel supply pressure in California and affect local oil prices.

The article also lists AI's electricity demand as another reason for the energy unit to be admired. The CNBC compiled data from regulatory documents show that pipeline companies, with the exception of Chevron, account for a higher share of the energy stock held by hedge funds, including Williams and Energy Transfer. According to the article, such companies are benefiting from the demand for gas transmission, electricity packages and data centres.

It also includes the names Solaris Energy Industries, ProPetro, Golar LNG, BKV and Targa Resources. Among them, Targa Resources recently announced a 20-year agreement with ExxonMobil to support the latter's continued expansion of the Texas Triple Basin.

  • High-profile areas include pipelines, LNG, electricity infrastructure
  • Key drivers include the Middle East conflict, the European Repository, and AI data centre expansion
  • California variables focus on: inadequate refining capacity and the advancement of the new pipeline project