On Monday (6.02), the worst earthquake in a decade occurred in south-eastern Turkey, near the border with Syria. Following the event, Turkish President Recep Tayyip Erdogan declared seven days of national mourning. As The Washington Post's news website reports, more than 9,500 deaths have already been confirmed, and the 7.8 magnitude quake severely damaged the country's energy infrastructure, including the main natural gas transmission line at Kahramanmaras. Let's take stock of what other damage has occurred and what impact this may have on individual markets?
Numerous infrastructural damages, areas cut off from gas and electricity
Turkey's energy minister wrote: "The strong earthquake that shook southeastern Turkey yesterday has caused serious damage to the country's energy infrastructure." He added: "Serious damage was done to the power transmission and distribution lines for natural gas. the main gas transmission line in Turkoğlu district of Kahramanmaraş (a branch of the TANAP pipeline east of Ceyhan), near the epicenter, was damaged the most. This is our main gas transmission pipeline that carries natural gas to Gaziantep, Hatay and Kilis, especially to Kahramanmaras. There may be power outages in these areas at the moment"
Reuters reports, citing other Turkish energy authority officials, that two critical oil pipelines (the Baku-Tbilisi-Ceyhan and Iraq-Turkey pipeline ITP) and the Akkuyu nuclear power plant under construction remained intact, which seems important as the plant is expected to meet 10% of the country's energy needs. The Kurdistan Regional Government (KRG) said that the flow of oil through the port of Ceyhan has been temporarily stopped.
Impact on global energy markets
According to 2017 data. Turkey is the 16th largest consumer of natural gas in the world (1.4% of total demand) and the 22nd largest consumer of oil (1% of global demand). Turkey is mainly an importer of energy resources, and is therefore largely dependent on neighbouring suppliers.
It appears that the disaster may have had a particular impact on the energy market. According to the Turkish Electricity Transmission Corporation (TEIAŞ), around 30 transformer substations have suffered varying levels of damage. Concerns about falling demand may have caused a rebound in energy markets. Natural gas contract prices rose by more than 7% to US$2,675. Despite this, they remain further down at levels before Russia's invasion of Ukraine.
Source: Conotoxia MT5, XNGUSD, Weekly
We could see a similar rebound in oil prices, which have risen by more than 6% since Monday, but this market does not appear to have been affected by the crash.
Source: Conotoxia MT5, XTIUSD, Weekly
Turkey's economy in disarray
The Turkish economy has been facing serious problems for years. Suffice it to say that CPI inflation there reached as high as 85% last year. It seems that despite this, the country's stock market may have been the most favourable investment last year, even after taking into account the currency conversion in dollars, which may have been directly linked to the high inflation, which is currently on a downward trend.
Monday's quake damage could further weaken the Turkish economy. The iShares MSCI Turkey ETF (TUR), which is down more than 8.5% since the start of the week, seems to indicate this.
Source: Conotoxia MT5, TUR, Weekly
Grzegorz Dróżdż, Market Analyst of Conotoxia Ltd. (Conotoxia investment service)
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76,41% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Trade this news from Conotoxia Ltd. platforms
Go to your account
