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<ul class="summary-list"><li>Mongolia won't fund the Siberia-2 pipeline for the next four years, Radio Free Europe reports.</li><li>The natural gas pipeline is an ambitious project to deepen trade between Russia and China.</li></ul>Plans for an ambitious natural-gas pipeline between Russia and China have hit a hitch, caused by a completely separate country: Mongolia.According to <a target="_blank" href="https://www.rferl.org/a/china-eurasia-power-of-siberia-mongolia-putin/33086686.html">Radio Free Europe</a>, Mongolia's government did not include funding for the Power of Siberia-2 pipeline in its spending plans for the next four years. The country serves as a buffer state between both Russia and China, and its engagement would be necessary for the project's realization.This fresh snag adds complications to an already uncertain mega-project.Russian energy giant Gazprom started design and survey work on the pipeline <a target="_blank" href="https://www.businessinsider.com/russia-china-gas-pipeline-sanctions-ukraine-putin-gazprom-soyuz-vostok-2022-3">in 2022</a>, projecting that it could deliver 1.8 trillion cubic feet of Russian natural gas to China each yearThis would make the Siberia-2 pipeline Gazprom's biggest deal with Beijing, and could provide a much-needed solution to Western sanctions. After Russia invaded Ukraine the same year, energy restrictions on Moscow have crippled its gas trade.<a target="_blank" href="https://markets.businessinsider.com/news/commodities/russia-gas-sales-revenue-gazprom-economy-decline-sanctions-ukraine-war-2024-6">Research commissioned</a> by the firm found that Gazprom is unlikely to recover gas sales lost to the Ukraine war for at least a decade, placing a greater need on Siberia-2's deployment.But Chinese counterparts face much less pressure, given that the country does not need more <a target="_blank" href="https://www.businessinsider.com/russia-putin-visit-china-xi-enemy-friends-2024-5">gas before the mid-2030s</a>, energy experts have said. For this reason, pipeline negotiations have stalled between Beijing and Moscow, given price and supply level disputes.According to Radio Free Europe, plans for the pipeline also contradict China's increasing shift towards green energy.Moreover, the Siberia-2 project isn't China's only option: President Xi Jinping has also signaled support for the Line D pipeline, deepening ties with Turkmenistan.Expanded access to Eastern markets has proven to be a lifeline for Russia as the West has increasingly shunned the Kremlin. China has been front and center in this transition, with bilateral trade ballooning to a record <a target="_blank" href="https://www.businessinsider.com/china-russia-trade-record-ukraine-war-xi-jinping-vladimir-putin-2024-1">$240 billion last year.</a>With Moscow highly dependent on its relationship with Beijing, some experts have characterized it as an <a target="_blank" class="" href="https://www.businessinsider.com/cia-chief-ukraine-war-failure-for-russia-on-many-levels-2024-1">emerging vassal to China</a>.

One key country is holding up a natural-gas pipeline that would deepen ties between Russia and China

<ul class="summary-list"><li>Natural-gas prices in Texas have dropped into negative territory.</li><li>This isn't common when energy demand is high during summer heatwaves.</li></ul>Natural-gas prices in Texas have slipped into negative territory even amid a heat advisory for parts of the state, <a target="_blank" href="https://www.reuters.com/business/energy/us-natgas-prices-turn-negative-texas-despite-heat-wave-2024-06-25/">Reuters</a> reported.Though this will sometimes occur, negative next-day gas prices are more typically seen in cooler seasons, when there's less demand for air conditioning — not when temperatures are climbing <a target="_blank" href="https://www.kxan.com/weather/forecast/todays-forecast/">into the triple digits</a>.Still, prices at Texas' Waha hub dropped to negative $1 per million British thermal unit on Monday.It's a situation where high demand has likely been offset by an oversupply of the energy commodity, and it's been attribution to pipeline maintenance by Kinder Morgan, an energy firm working to limit gas capacity in the Permian Highway gas pipe.Taking this infrastructure offline can lead to trapped natural gas, momentarily boosting supply. According to traders that spoke with Reuters, other reasons may have contributed to the negative price slide as well.This is the 18th time this year that Texas natural gas price have entered negative territory, the outlet said. According to Fortune, some of this price action was similarly caused by pipe shutdowns, such as when the Natural Gas Pipeline of America was taken offline <a target="_blank" href="https://fortune.com/2024/04/27/natural-gas-prices-negative-territory-west-texas-supply-glut-weak-demand/">due to fire in April</a>.For Texas' energy consumers, however, this likely won't lead to cheaper electricity bills. Already, past heat waves have caused the <a target="_blank" href="https://markets.businessinsider.com/news/commodities/electricity-price-biggest-increases-us-regions-energy-bills-summer-heatwave-2024-6?_gl=1*sc5i43*_ga*MTMxNDIwNDI1Ni4xNjc1Njg3OTU4*_ga_E21CV80ZCZ*MTcxOTM0MjExNS4zNjIuMC4xNzE5MzQyMTE1LjYwLjAuMA..">states' spot electricity prices to soar</a> as high as 20,000%.What's more, West South Central states — including Texas — are likely to have the most expensive bills of the country this year, the Energy Information Administration reported.

Texas natural-gas prices turn negative despite soaring heatwave temperatures

<ul class="summary-list"><li>Russia's oil and gas profits are under pressure.</li><li>Before the war, Russia supplied 40% of Europe's gas. It's now down to 15%.</li></ul>Russia's energy sector has taken a hit from Western sanctions.But Moscow doesn't appear ready to acknowledge that it's not in a financial position to cut Europe off from its natural gas exports completely.In an interview with <a target="_blank" class="" href="https://mid.ru/en/foreign_policy/news/1970551/">Sky News Arabia on Friday,</a> Russian Foreign Minister Sergey Lavrov said Russia hasn't cut off gas exports to Europe because Russians are "decent people.""We are decent people. We signed long-term contracts with Europe," Lavrov said."We always honor our obligations, unlike Europe or the United States," Lavrov added.Besides, as Lavrov said, Russia and Europe's gas deals benefit both sides."If cooperation is mutually beneficial, why shoot yourself in the foot?" he asked.What Lavrov didn't outright address in the interview is the more likely reason Russia continues to export to Europe: It needs the money.<h2 id="dedf49a1-9ad7-40d6-9c80-9ef995fa1d77">Russia's oil and gas profits are under pressure</h2>Before starting the war in Ukraine and being sanctioned by the West, Russia supplied as much as <a target="_blank" rel="" class="" href="https://www.brookings.edu/articles/europes-messy-russian-gas-divorce/">40% of Europe's gas.</a> That declined to roughly <a target="_blank" class="" href="https://www.brookings.edu/articles/europes-messy-russian-gas-divorce/#:~:text=Russia%20cut%20off%20the%20gas,price%20cap%20on%20Russian%20oil.">15% at the end of 2023</a> after three out of four Nord Stream pipelines carrying Russian gas to Europe were damaged. The remaining Nord Stream pipeline has never been commissioned, and Russia was already slowing its gas flows to Europe before the blast.Now, Russia's oil and gas profits are under pressure from sanctions and restrictions — including a G7 price cap on its crude oil exports — as its war with Ukraine heads into its 31st month.<a target="_blank" class="" href="https://markets.businessinsider.com/news/commodities/russian-energy-revenue-crude-oil-prices-gas-exports-sanctions-ukraine-2024-1">Russia's oil and gas revenues</a> hit 8.82 trillion rubles, or $94.6 billion, in 2023. That's 24% lower than the 11.6 trillion rubles it recorded in 2022, when revenues jumped due to oil price volatility. In 2021, Russia's oil and gas sales revenue stood at 9 trillion rubles.Russia has <a target="_blank" class="" href="https://www.reuters.com/markets/commodities/russia-raises-forecast-2024-oil-gas-export-revenues-by-174-bln-document-shows-2024-09-06/">raised its forecast</a> for its oil and gas sales this year, but the breakeven oil price has also risen significantly since the war started. That's due to sanctions-related factors, such as higher Russian-underwritten insurance premiums and shipping costs related to a <a target="_blank" class="" href="https://www.businessinsider.com/russias-dark-fleet-oil-exports-strong-red-sea-risks-strategy-2024-1">dark fleet</a> transporting the commodities.According to <a target="_blank" class="" href="https://www.spglobal.com/commodityinsights/en/market-insights/latest-news/oil/081324-sanctions-dent-russian-economy-but-commodities-exports-boost-kremlin-coffers#:~:text=S%26P%20Global%20Commodity%20Insights%20estimated,though%2C%20for%20three%20main%20reasons.">S&amp;P Global,</a> Russia's breakeven oil price was $62 a barrel in 2021. It's now $94 a barrel.Higher breakeven prices eat into profits, which would hit Russian energy firms and have a spillover impact on the <a target="_blank" class="" href="https://www.businessinsider.com/russian-economy-overheating-consumer-spending-tourism-central-bank-interest-rate-2024-7">war economy</a> — which appears resilient but is fighting multiple challenges. There's also the question of how well Russia's economy is really doing; in July, a group of eight <a target="_blank" class="" href="https://www.businessinsider.com/russia-economy-wartime-boom-outlook-western-us-sanctions-soviet-union-2024-7">European finance ministers</a> said outright that Russia is lying about its booming economy.To be sure, <a target="_blank" class="" href="https://www.businessinsider.com/germany-europe-russia-gas-renewables-oil-energy-security-ukraine-war-2022-4">other geopolitical factors</a> could also be playing into Russia's decision to keep natural gas exports moving into Europe. But the role oil and gas play in Russia's economy can't be understated.The oil and gas industry accounts for <a target="_blank" rel=" nofollow" class="" href="https://www.oxfordenergy.org/wpcms/wp-content/uploads/2024/03/Follow-the-Money-Russian-Oil.pdf">30% to 50% of Russia's federal budget revenue,</a> the Oxford Institute for Energy Studies estimated.Bloomberg estimates that Russia could lose as much as <a target="_blank" class="" href="https://markets.businessinsider.com/news/stocks/russia-economy-ukraine-war-revenue-gas-pipeline-energy-europe-trade-2024-9">$6.5 billion a year</a> if Naftogaz, Ukraine's state-run energy giant, doesn't renew a gas-transit deal that expires this year. This deal allows Russian gas to be transported to Europe via Ukraine.While Russia has managed to pivot to <a target="_blank" rel="" class="" href="https://www.businessinsider.com/russia-economy-divert-oil-exports-europe-india-china-circumvent-sanctions-2023-12">alternative markets, </a>the commodities are often sold at huge discounts due to sanctions, according to an <a target="_blank" rel=" nofollow" class="" href="https://prod-us3.plattslive.com/commodities/crude/news-and-insight/081324-sanctions-dent-russian-economy-but-commodities-exports-boost-kremlin-coffers">S&amp;P Global</a> report last month."Russia has managed to sustain its oil production and exports despite Western sanctions and <a target="_blank" rel=" nofollow" class="" href="https://www.opec.org/opec_web/en/press_room/7369.htm">OPEC+ cuts,</a> although it has faced challenges with its oil cash flows," wrote Svetlana Tretyakova, a senior analyst at Rystad Energy, in late August.

Russia says it's the bigger person for not cutting Europe's natural gas supply — but that's not all there is to it     

<ul class="summary-list"><li>Europe continues to import Russian natural gas, despite pledges to wean off the fuel after the invasion of Ukraine.</li><li>Europe's reliance on Russian gas has dropped from over 40% to about 15% since the Ukraine war.</li></ul>Europe has pledged to wean itself from Russian natural gas following Moscow's invasion of Ukraine, but it's still buying the fuel.Europe's monthly imports of Russian liquefied natural gas — the supercooled version of natural gas that can be transported on ships — have been holding relatively steady, in the 850,000 to 1.6 million metric ton range, since the invasion of Ukraine, per <a target="_blank" class="" href="https://www.bloomberg.com/news/newsletters/2024-07-30/russia-s-lng-clout-in-europe-rises-as-us-fuel-heads-elsewhere">Bloomberg records.</a>This continued import of Russian fuel shows the complications of cutting off Russian gas completely in the global energy market.To be sure, Russia's share in Europe's natural-gas imports has dropped dramatically since the Ukraine war started.Before the invasion, <a target="_blank" class="" href="https://www.brookings.edu/articles/europes-messy-russian-gas-divorce/">Europe imported</a> over 40% of its natural gas from Russia — its single largest supplier and a major energy producer — mainly via pipelines.By the end of last year, Europe still imported about 15% of its total gas supply from Russia, with about 9% coming from pipelines and 6% as LNG. This is down from 43% and 4% from pipelines and LNG, respectively, in the first quarter of 2021."This means that the handful of member states that have not been able to or have not chosen to reduce their dependency remain highly vulnerable to Russia's weaponization of energy imports," Brookings analysts wrote in a June report.<h2 id="d2e6d7e8-d863-4f71-a938-3b296496b522">US stepped up LNG imports to Europe, but shipments have fallen this year</h2>Europe's continued imports of Russian gas are in part due to shifting demands for the fuel that has driven a lot of exports from the US — the <a target="_blank" class="" href="https://www.reuters.com/business/energy/us-was-top-lng-exporter-2023-hit-record-levels-2024-01-02/">world's top LNG exporter</a> last year — to other locations this year.The <a target="_blank" class="" href="https://www.bloomberg.com/news/articles/2022-07-01/us-lng-supplies-to-europe-overtake-russian-gas-iea-says">US supplied more natural gas</a> to Europe than Russia did for the first time ever in June 2022, but the gap between the two countries' LNG shipments has narrowed.In July, the difference between the amount of LNG the US and Russia shipped to Europe contracted to its lowest since late 2021, according to a <a target="_blank" class="" href="https://www.bloomberg.com/news/newsletters/2024-07-30/russia-s-lng-clout-in-europe-rises-as-us-fuel-heads-elsewhere">Bloomberg analysis</a> of preliminary ship-tracking data published on Tuesday.At the end of July, Europe imported 1.5 million metric tons of LNG from the US, just slightly more than the 1.3 million tons the region imported from Russia.The gap between Europe's imports has been narrowing this year. At the end of January, Europe imported 5.2 million tons of LNG from the US and just 1.5 million tons from Russia.This is mostly due to US LNG shippers sending their goods to where the money is: Asia, where prices have been trading at a premium to Europe due to a summer heatwave.Spot LNG cargoes for delivery to North Asia were priced around $12 per million British thermal units, or mmBtu, in the week to July 26, according to <a target="_blank" class="" href="https://www.reuters.com/markets/commodities/asias-lng-imports-shift-higher-europes-fades-russell-2024-07-29/">Reuters</a> in a Monday report. This was about 17% higher than the $10.30 mmBtu for delivery to Europe on July 26.Importers from Japan — a top buyer — were seeking spot cargoes in late June, according to Rystad, an energy research firm, at the time. This means demand has risen more than what importers had projected when they locked in long-term contracts earlier.Asia was the "preferred destination" for US cargoes for delivery in August and September, wrote Masanori Odaka, a senior analyst at Rystad.

The US is sending less natural gas to Europe, complicating Europe's plans to cut off Russian gas

<ul class="summary-list"><li>There's less than a 30% chance Middle Eastern conflicts spiral out of control, an Institute of International Finance economist wrote.</li><li>But in that scenario, oil and natural gas could appreciate 40% as supply gets strained.</li></ul>Oil and natural gas prices could significantly appreciate if conflicts in the Middle East take a turn for the worse, the Institute of International Finance said in a Thursday report. Thankfully the association's baseline scenario sees current turmoil as unlikely to escalate, with a less than 30% chance a wider regional war flares up. But if tensions did spiral out of control, the effects on the world's oil and natural gas supply would be dire."The potential impact of a disruption of supply on energy prices depends on the duration and severity of the disruption. While it is difficult to predict by how much and for how long energy prices would rise, we assume that oil and natural gas prices surge by 40% in 2024," analysts led by Chief Economist Garbis Iradian wrote. "Along with the increase in oil and natural gas, freight and insurance costs would increase considerably, creating inflationary pressures at a time when inflation remains above target."In the IIF's more pessimistic outlook, the US and its allies could fail to bring down the Houthis' capacity to attack Red Sea shipping lanes, something the Yemeni rebel group has been actively doing since late 2023. The attacks, carried out in protest of Israeli military operations in the Gaza Strip, have triggered Western security initiatives to operate in the region. If the Houthis hold out, their attacks could expand to include oil tankers and carriers that raw commodities, such as iron and grain, Iradian wrote. Meanwhile, oil supply would take a deeper hit from broader disapproval of Israeli actions, potentially sparking a war between Hezbollah and Israel. This could also drag Iran into the conflict, disrupting shipping from the Strait of Hormuz. "About 30% of global oil consumption passes through this strait, with a large portion of the oil exports from Saudi Arabia, Iraq, Iran, the UAE, Kuwait, and Qatar's LNG passing through it as well," Iradian said.The IIF's hypothetical has the potential to bring global growth down to 2.4% this year, compared to 3.1% in 2023. Under continued attacks on shipping, global trade volumes would decelerate to 0.8%, putting upwards pressure on inflation.Across developed markets, this would mean higher-for-longer interest rates, the IIF said, contributing to slower growth.The <a href="https://markets.businessinsider.com/news/commodities/oil-price-outlook-opec-china-red-sea-shipping-crude-supply-2024-2?utm_medium=referral&amp;utm_source=yahoo.com">Red Sea turmoil may be the sole factor</a> keeping global crude at current levels, with <a href="https://markets.businessinsider.com/commodities/oil-price?utm_medium=ingest&amp;utm_source=markets">Brent</a> crude at $82.75. Otherwise, historic US production levels have kept supply ample, while demand has slowed from markets such as China.

Oil and natural gas prices could spike 40% this year if war spreads across the Middle East, economist says

<ul class="summary-list"><li>Short-sellers betting against renewable energy stocks made $1.3 billion since Trump's win, Bloomberg reported. </li><li>Trump is expected to roll back many of the Biden administration's climate programs.</li></ul>It was a tough week for clean energy stocks after Donald Trump clinched the presidential election, but for the short sellers betting against them, the gains have been impressive. Traders betting against renewables have gains on paper of around $1.3 billion since Trump's win sent stocks in the sector tumbling, according to Bloomberg.Among the most-shorted renewable names are shares of Plug Power, SolarEdge Technologies, and Enphase Energy, which have each seen declines of over 24% since market close on Tuesday. First Solar and Bloom Energy have also been popular targets for short-sellers, and have lost around 11% and 3% since Tuesday.The renewables selloff comes after Trump won the US presidential election earlier this week.Trump, who frequently used the slogan "drill, baby, drill" while on the campaign trail, is expected to roll back many of the Biden administration's clean energy initiatives. In particular, Trump has long been critical of the Inflation Reduction Act's billions of dollars toward solar and wind subsidies.Trump could also slash subsidies for electric vehicles and manufacturing EV batteries in the US, which has led EV makers' stocks to tumble (<a target="_blank" href="https://markets.businessinsider.com/news/stocks/tesla-stock-price-trump-win-elon-musk-election-tsla-2024-11">excluding Tesla</a>, which is headed by key Trump ally Elon Musk and is expected to benefit from the former president's return to the White House).Trump is also expected to pull out of the Paris Agreement again, which would remove the US from worldwide climate diplomacy talks with Europe and China.Trump has also promised to make it easier to develop energy infrastructure. In the spring, he asked top oil executives for a <a target="_blank" href="https://www.businessinsider.com/trump-asked-oil-execs-for-1bn-2024?utm_source=Iterable&amp;utm_medium=email&amp;utm_campaign=campaign_BI%20Sustainability,%20November%207,%202024">$1 billion contribution</a> to his campaign in exchange for dismantling Biden's environmental policies, handing out more drilling leases, and expediting permits for new liquefied natural gas exports, according to a report from the Washington Post.

Traders betting against clean energy stocks have made $1.3 billion since Trump's election win

<ul class="summary-list"><li>Interest rates and stock returns are expected to decline, impacting investment strategies.</li><li>Historically, stocks and bonds have alternated in performance, affecting portfolio decisions.</li></ul>A diversified investing strategy means a split between stocks and <a target="_blank" class="" href="https://www.businessinsider.com/personal-finance/investing/what-is-a-bond">bonds</a>, at minimum. But for the better part of the last two decades, interest rates were near zero, and real returns in bonds were lacking.Still, investors added them to their portfolios because history has shown us that asset classes can zig and zag, with long <a target="_blank" class="" href="https://www.businessinsider.com/stock-and-bond-market-correlation-normal-2014-2">periods of stock market outperformance</a> relative to bonds and intervals where that dynamic flipped.The last two years were great for both asset classes. Elevated rates put the bond market back on investors' minds, while the <a target="_blank" class="" href="https://markets.businessinsider.com/index/s&amp;p_500">S&amp;P 500</a> had a solid 26% total return. But depending on who you ask, the future may not be as bright.Yields will be less attractive as the <a target="_blank" class="" href="https://www.businessinsider.com/interest-rate-cuts-federal-reserve-election-jerome-powell-inflation-jobs-2024-11#:~:text=The%20Fed%20cut%20interest%20rates,country%20recovered%20from%20the%20pandemic.">Fed begins its rate cuts</a> for this cycle. Meanwhile, Goldman Sachs expects stock-market returns to be muted for the coming decade. The S&amp;P 500 is predicted to see a mere 3% annualized return over the next 10 years, which could lag the 10-year Treasury at an expected 4% yield, according to a <a target="_blank" class="" href="https://www.businessinsider.com/how-to-beat-stock-market-returns-next-decade-goldman-sachs-2024-10">recent note</a> by the investment bank's chief US equity strategist David Kostin.If the bears are right, investors may be forced to take on more risk for returns. Sounds gloomy, but for bond traders like Mark Rieder, who has over two decades of experience in the sector, it could be an opportunity to dig for bargains in corporate credit.Generating alpha for a credit trader could mean beating a peer, a Bloomberg fixed income index that matches the category of bonds traded, or simply remaining in positive territory in terms of total returns when the market is down, Rieder told Business Insider."Over the past 10 years, when interest rates were very low, it was not an exciting time to be a credit analyst and a portfolio manager," Rieder said. "But it's much more interesting today, and I'm really excited about that."However, active debt investing takes a good level of skill and consistent effort to make the right credit selection, according to his new book, "Reminiscences of a Bond Operator." Like the stock-picking process, following the crowd or consensus won't result in alpha. A credit trader must conduct the same level of fundamental analysis and dig into a company's balance sheet, earnings calls, 10Qs, and 10Ks, among other things, to determine valuation."I've always believed that a good credit analyst is also a really good equity analyst because you really need to understand the capital structure of the companies that you're evaluating and all of their different needs," Rieder said. "Most companies want to have their stock price go up, and so as a credit analyst, you need to understand that so that you can understand what their motivations are."It's especially important now, as the credit space faces its own set of challenges. Like the <a target="_blank" class="" href="https://www.businessinsider.com/personal-finance/investing/are-we-in-a-recession">business cycle</a>, credit has its booms and busts based on macro conditions and supply and demand. In a strong economic environment, corporate cash flows rise, and companies increase borrowing with favorable lending terms. But when times are tight, companies deleverage until their debt is less than their cash flow. Once that equilibrium is satisfied, more borrowing ensues, according to his book.Rieder said credit is in the boom part of the cycle. This might sound surprising, considering debt has been expensive for the better part of the last two years. But most companies were locked into low yields before rates rose, he noted. As debt turnover increases, investors need to be cautious."There's a lag impact on the increase in rates. Most companies borrow for long periods of time, five years, 10 years," Rieder said. "A lot of companies issued debt when interest rates were very low. They're now only starting to refinance that low-coupon debt. That, in turn, is what causes an impact."He doesn't expect that the Fed's cutting cycle will mitigate the crunch. The central bank can impact front-end yields, but the back end is driven by additional considerations, he noted. The 10-year rose to 4.3% shortly after the first rate cut of September, a signal that <a target="_blank" class="" href="https://www.businessinsider.com/us-election-forecast-most-accurate-economist-predicts-outcome-economic-impact-2024-10">investors were looking ahead</a> at other economic risk factors, including concerns over the government's ballooning deficit, he added. Additionally, economic conditions such as elevated credit card debt pose concerns for future corporate profits.<h2 id="101d0bc7-10c7-46f9-a758-eea160588283">Trading credit</h2>Right now, investment-grade credit spreads are tight. The yields in corporate bonds aren't much higher than in government bonds, meaning less compensation for more risk. But if we move from the boom to the bust phase, credit spreads could widen, and that could create opportunities in the credit space, he said.While spreads are tight, he prefers front-end yield or pairing trades with cheap optionality. The cost of shorting a credit index like the CDX Investment Grade 5-Year Index, a credit-default-swap index that tracks the credit risk of large US investment-grade companies, is low. And since spreads are trading at historically tight levels, it's less likely to get much lower, which could limit potential losses, he said. This position can then be paired with a trade expected to perform positively.An example he provides of a market-neutral pair trade could look like buying a corporate bond in a sector with structural tailwinds, such as a natural gas producer set to benefit from increased demand and rising energy prices, or airplane lessors who benefit from higher lease rates due to a tight aircraft supply — a situation that's unlikely to ease in the near term because of production challenges faced by manufacturers. Then, take a short position in an interest-rate future to hedge against the bond's interest-rate risk."This trade works if natural gas prices remain stable or rise, leading the energy bond to outperform the overall corporate bond market," Rieder said. "It's an excellent opportunity to capitalize on the current tight credit spread conditions and complacency in the overall credit market."Having liquidity can also give you an upper hand. As spreads widen, investors may be forced into selling higher-quality credit because they can't offload the lower-quality ones, he said."There are huge opportunities in credit if you remain liquid during dislocations," Rieder said. "Other investors are going to be looking for liquidity. They can't sell what they want to, so they sell what they can, and that can lead to opportunities to buy cheap assets."

A veteran bond operator shares an alpha-generating strategy for dropping yields and muted stock-market returns

<ul class="summary-list"><li>Russian gas giant Gazprom sent more natural gas to China than Europe in the first nine months of the year.</li><li>Europe had previously been Russia's biggest energy customer, but flows have cratered since the war in Ukraine began. </li></ul>Russian gas flows to Europe are dwindling, but China is stepping in and is set to become Russia's biggest customer of pipeline gas this year.Gazprom, Russia's state-owned energy giant, exported 23.7 billion cubic meters of natural gas to China in the first nine months of the year, up 40% from the same period a year earlier, <a target="_blank" class="" href="https://www.bloomberg.com/news/articles/2024-10-21/china-is-overtaking-europe-as-top-market-for-russia-s-pipeline-gas?srnd=phx-markets">according to Bloomberg</a>.Those flows surpass the 22.5 billion cubic meters of pipeline gas exported to Europe in the same period, putting China on track to overtake Europe as Russia's biggest natural gas customer in 2024.The increased flows to China come as Gazprom has become increasingly reliant on energy demand from the world's second-largest economy. Europe had long been Russia's biggest energy partner and once received as much as <a target="_blank" href="https://www.brookings.edu/articles/europes-messy-russian-gas-divorce/">40% of its gas</a> from Moscow, but flows have declined since the invasion of Ukraine in 2022.Since the invasion, Europe has placed a host of restrictions on Russian gas flows to the continent, leading Gazprom to post its <a target="_blank" href="https://markets.businessinsider.com/news/commodities/russia-oil-gas-energy-flows-gazprom-sanctions-ukraine-war-putin-2024-5">first annual net loss</a> since 1999 and a 40% drop in gas revenue last year.Gazprom said recently that it likely <a target="_blank" href="https://markets.businessinsider.com/news/commodities/russia-gas-sales-revenue-gazprom-economy-decline-sanctions-ukraine-war-2024-6">won't recoup sales</a> lost to the war for at least a decade, though some EU countries like Hungary, Slovakia, and Austria continue to rely on Russian energy products. Meanwhile, Gazprom's agreement with Ukraine's state-run energy firm is set to expire in December, and if Ukraine doesn't renew it, about half of gas flows to Europe could be stalled. That could result in Russia <a target="_blank" href="https://markets.businessinsider.com/news/stocks/russia-economy-ukraine-war-revenue-gas-pipeline-energy-europe-trade-2024-9">losing as much as $6.5 billion a year</a>.Gazprom's relationship with China could strengthen in the coming months amid a host of plans to increase trade.After an agreement last month, the company plans to ramp up its use of the Power of Siberia pipeline to its full export capacity later this year, slightly earlier than previous targets for early next year. The move would increase daily flows toward the maximum contract level of 38 billion cubic meters a year.Gazprom is also plotting several new links to China, including one from Russia's far east that would export a maximum capacity of 10 billion cubic meters a year, set to launch in 2027. Another link, Power of Siberia 2, is under discussion and would increase the country's gas flows to China to almost 100 billion cubic meters a year.

China is set to be Russia's biggest pipeline gas customer this year as flows to Europe dwindle

<ul class="summary-list"><li>Energy traders are betting that Hurricane Milton will spark power outages in Florida.</li><li>US natural gas futures have fallen 8% in the last three days.</li></ul>Energy traders are on high alert for Hurricane Milton and are ramping up bets that the weather event is about to knock out electricity in Florida and surrounding states, leaving power plants idling as demand evaporates.Front-month US natural gas futures have dropped 8% over the last three days, from $2.97 to $2.74 per million British thermal units as of Tuesday morning. It's a sign markets are anticipating a disruption to power plants that could send prices tumbling, despite low gas storage in recent months.The price drop comes as the Southeast prepares for <a target="_blank" class="" href="https://www.businessinsider.com/hurricane-milton-tampa-mayor-castor-evacuation-orders-die-warning-helene-2024-10">Hurricane Milton,</a> which is expected to hit Florida by Wednesday evening. The storm, which was classified as a Category 5 hurricane, is expected to bring severe damage to Florida and the surrounding states just weeks after the destructive Hurricane Helene brought high winds and flooding to the region. Energy traders have leaned more bullish on natural gas in recent weeks before the latest bout of extreme weather. Gas futures have jumped 41% over the last six weeks, partly fueled by record-low natural gas inventories for the last three months, according to <a target="_blank" class="" href="https://www.eia.gov/naturalgas/weekly/#tabs-storage-1">government data on gas storage</a> dating back for the last 27 years.Long bets on natural gas, meanwhile, have climbed to their highest level since June on the New York Mercantile and Intercontinental Exchanges, <a target="_blank" class="" href="https://www.reuters.com/business/energy/us-natgas-prices-drop-4-one-week-low-ahead-hurricane-milton-2024-10-08/">Reuters</a> reported.

Traders are betting Hurricane Milton will knock out electricity and leave power plants idling

<ul class="summary-list"><li>Russia expects to sell gas to China at almost half the price compared to European buyers, Bloomberg reported.</li><li>Gas for China will average $271.6 per 1,000 cubic meters in 2024, versus $481.7 for buyers in Europe and Turkey.</li></ul>A new economic outlook revealed that Russia expects to sell gas to China at a steeply discounted rate over the next three years, far below the price European buyers will pay, according to a <a href="https://www.bloomberg.com/news/articles/2023-09-08/russia-expects-to-sell-gas-to-china-at-half-the-price-for-europe?srnd=markets-vp">Bloomberg</a> report.The report, citing an outlook through 2026 from Prime Minister Mikhail Mishustin, showed that Moscow will sell pipeline natural gas to China at an average price of $271.6 per 1,000 cubic meters next year.Buyers in Europe and Turkey, on the other hand, will face an average price of $481.7. Those prices should remain through 2026, with gradual reductions over time, per Bloomberg. This year, meanwhile, Russia expects to sell gas to China at an average of $297.3 per 1,000 cubic meters, while the remaining clients in Europe and Turkey will pay an average of $500.6.Meanwhile, Moscow anticipates state-run energy giant Gazprom to supply natural gas to China on a $400 billion contract, via the Power of Siberia connection. <a href="https://markets.businessinsider.com/news/commodities/russia-economy-china-beijing-trade-imports-ukraine-war-putin-markets-2023-7">Russia and China's economic ties have deepened</a> since last February, when Vladimir Putin ordered the "special military operation" in Ukraine.Because Russia's standing on the global economic order has weakened significantly, it has become increasingly reliant on China for trade.Thousands of companies have left the country, it's navigating historic economic sanctions, and most of its Western trade partners have turned elsewhere — leaving China with the upper hand. "Clearly Russia is much more dependent on China to provide it with the imports and advanced manufactured products it needs, while Russian markets represent a negligible secondary opportunity for Chinese businesses," Yale researcher Jeffrey Sonnenfeld told Insider in a July interview.

Russia will sell natural gas to China at almost a 50% discount compared to European buyers

<ul><li>Natural gas prices surged as much as 9% on Wednesday as energy workers in Australia threatened to strike.</li><li>Australia is the world's second-largest exporter of liquefied natural gas, so potential work stoppages could threaten global supply of the commodity.</li><li>Natural gas prices have surged 22% over the past week, but are still down 60% from a year ago.</li></ul>The possibility of strikes at natural gas plants in Australia sent the commodity surging as much as 9% on Wednesday.Workers at major liquefied natural gas plants off the coast of Western Australia have voted to inch closer towards a potential work stoppage.If the strikes proceed and are long-lasting, it could have major implications for the global supply of natural gas heading into the typically high-demand winter months, as <a href="https://markets.businessinsider.com/news/commodities/natural-gas-price-crisis-commodities-outlook-europe-energy-crisis-australia-2022-8">Australia is the world's 2nd largest exporter</a> of liquefied natural gas, trailing only Qatar.<a href="https://markets.businessinsider.com/commodities/natural-gas-price">Natural gas prices</a> hit a high of $3.018 per million British thermal units on Wednesday, representing the first time since March 3 that the commodity jumped above the $3 level. Natural gas prices are up 22% over the past week, but are still down 60% from a year-ago.According to the <a href="https://www.afr.com/work-and-careers/workplace/lng-exports-at-risk-as-woodside-and-chevron-strikes-loom-20230809-p5dv3n" target="_blank" rel="noopener">Australian Financial Review,</a> workers at natural gas plants run by <a href="https://markets.businessinsider.com/stocks/cvx-stock">Chevron</a> and Woodside, an Australian energy company, are organizing for a strike. About 99% of 180 production employees at Woodside's North Rankin, Goodwyn, and Angel natural gas platforms voted on Wednesday for protected action options for the first time in 30 years. Those protected action options include indefinite strikes.The voting results mean that Woodside's natural gas workers can stop work with seven days' notice as early as next week, the Australian Financial Review reported. Meanwhile, hundreds of workers at Chevron's Wheatstone and Gorgon natural gas facilities filed for a protected action ballot on Tuesday, which could ultimately lead to a potential strike.Some of the sticking points in the union negotiations include higher pay for natural gas plant workers and restrictions against outsourcing jobs to contractors. European countries are likely hoping for a quick resolution between the workers and natural gas companies, as they have become heavily reliant on liquefied natural gas since the Ukraine war began, as <a href="https://www.businessinsider.com/russia-make-more-money-off-energy-exports-thanks-to-europe-2022-6">Russia has mostly stopped supplying the continent</a> with its energy resources.Shares of <a href="https://markets.businessinsider.com/stocks/lng-stock">Cheniere Energy</a>, a US-based exporter of liquefied natural gas, surged as much as 5% in Wednesday's trading session. Shares of Chevron traded about 0.5% higher Wednesday afternoon.

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