Natural gas prices skyrocketed

Wholesale natural gas prices in Europe hit an all-time high this year, and demand continued to grow after the economic impact of the epidemic faded further, and natural gas prices did not fall even as the summer ended into the traditional off-season of energy consumption. As of Friday (September 24), European natural gas futures prices had soared from 8 pounds per megawatt hour in May 2020 to about 200 pounds, an increase of nearly 25 times!

With the passage of time, with the cold winter approaching, Europe's energy demand will only increase, but there will be no significant improvement on the supply side.

Vitol Group, the world's largest independent crude oil trader, expects the shift in fuel demand to increase oil demand by 500000 barrels a day this winter. Facts Global Energy, a consultancy, believes that Asian power plants and refineries around the world are looking for cheaper alternatives to natural gas. However, OPEC believes that the impact is slightly smaller, and the additional demand for oil is expected to be 370000 barrels per day in the next two quarters.

As countries strive to reduce the use of coal and increase the use of cleaner energy, household heating and industrial power generation are more dependent on natural gas than ever before. But because there is not enough fuel to fuel the recovery after the epidemic, and natural gas stocks may be depleted before the cold months, as exporters such as Russia take various measures to reduce exports, countries are trying to compete for natural gas supplies at higher prices.

Therefore, when the temperature drops, the crisis of fuel shortage will become more serious. The price of natural gas will remain strong.

Oil prices may benefit again

As demand for fuel increases, higher natural gas prices also seem to be driving demand for oil. Crude oil inventories have been falling, with U. S. inventories nearing a three-year low.

Us crude oil inventories fell 3.481 million barrels to 414 million barrels in the week to September 17, the lowest level since October 2018, according to the data. Tight supply and strong demand have pushed up oil prices.

WTI crude oil futures continued their rally last week, closing up 2.79% at $73.98 a barrel for the fifth consecutive week, while London Brent crude futures closed up 3.65% at $78.09 a barrel, the highest level since October 2018.

In addition, the impact of hurricanes continues. Hurricane Ida swept through oil-producing areas in the Gulf of Mexico before wreaking havoc across the United States. The hurricane eventually reduced oil production in the Gulf of Mexico by 30 million barrels last month. Royal Dutch Shell oil production will still be about 300000 barrels per day below normal. Oil production will not fully recover until the beginning of next year.

Oil prices may rise to $90

In the fourth quarter and the start of winter in the northern hemisphere, many market watchers say energy prices will rise further. Among them, Goldman Sachs Group Group said that market demand was greater than expected and raised its year-end Brent crude forecast by $10 to $90 a barrel.

Citigroup Inc said he was still very optimistic about the outlook for commodities, especially crude oil and natural gas.

Summary

There has been a saying in commodity markets that "the antidote to high prices is the high price itself." "

Affected by the epidemic, economic recovery and the relationship between supply and demand, energy prices have risen by leaps and bounds, and strong prices will continue for some time. But high prices will in turn affect demand and even hinder economic recovery. when the market cannot afford exorbitant oil and gas prices, supply and demand may be balanced again, and long-term oil and gas prices will stabilize.