Why is the cold snap tightening Europe’s natural gas market?

  • The European benchmark TTF natural gas price rose above 97 euros per megawatt-hour, which JPMorgan said was a four-year high; as of the Sunday covered by the report, EU gas storage facilities were 74.6% full.
  • Average temperatures across continental Europe are forecast to fall from the weekend to 2 to 3 degrees Celsius below normal. The cold snap will also reach northeastern China, Japan and South Korea, with temperatures in some areas forecast to fall 5 degrees Celsius below normal. This puts Europe and East Asia under simultaneous pressure for gas and in competition for liquefied natural gas supplies.
  • JPMorgan noted that TTF prices were about 80% above their 200-day moving average, close to the maximum deviation of about 87% during the war, showing that prices have risen markedly relative to their recent average.

How do the two forces in the diesel market offset each other?

  • Russian diesel production rose from about 160 thousand tonnes a day to nearly 180 thousand tonnes, while a seasonal decline in consumption freed up about 40 thousand tonnes a day for export. Citing the Financial Times, the report said about 140 thousand tonnes of Russian diesel were expected to reach US ports next week, among the first shipments under a recent US-Russian arrangement exempting Russian diesel from sanctions.
  • China is moving in the opposite direction: diesel inventories held by the sales divisions of state-owned refiners have fallen to a near four-year low. The report said low inventories could prompt Chinese diesel exports to decline by year-end, after exports reached their highest level since 2023 in September.
  • JPMorgan therefore described refined-product supply as sending mixed signals: Russian supply entering the global market is being offset by declining Chinese inventories and a possible reduction in exports.

Why does a fall in iron ore not necessarily mean a simultaneous decline in miners’ free-on-board prices?

  • Singapore iron ore prices approached 89.25 dollars a tonne, an intraday low since September 2024; Chinese steel consumption is approaching a seasonally weak period.
  • Meanwhile, falling freight costs improved miners’ free-on-board prices. Iron ore freight from Australia to China fell by about 3 dollars a tonne from early October to 11.7 dollars, close to its level before the Iran conflict; the Brazil-to-China route fell by about 7 dollars to 30 dollars, but remained about 50% above its pre-conflict level.
  • According to the JPMorgan team, the iron ore free-on-board price associated with the Australia-to-China route has recovered to about 78 dollars a tonne, while the equivalent for Brazil to China is about 60 dollars.
  • China’s economic signals are also mixed: the report said Chinese industrial companies’ profits rose 14.4% year on year last month, accelerating from 4.2% in August, but movements in Chinese government bonds still reflect concerns about growth.

What has changed in gold demand and nuclear power construction?

  • As gold prices fell, Chinese household demand for gold picked up. About 43 million lots of the Shanghai Gold Exchange’s Au99.99 contract traded last week, equivalent to about 430 tonnes, the highest since April; the report cited banking sources as saying purchases of products such as gold accumulation plans in the first nine months had exceeded the full-year total for 2025.
  • The head of the International Energy Agency said about 90 gigawatts of nuclear power capacity is under construction worldwide, the highest in 40 years. He said energy supply disruptions had accelerated countries’ efforts to reduce their dependence on vulnerable energy sources and transport routes.