Point of Isle Gas Terminal in Tarakure, Wales, September 20, 2021.
Christopher Furlong | Getty Images
The global energy crisis is sending Natural gas Prices soared in the UK, Europe and Asia, setting record highs. However, experts say that stratospheric prices found in Europe are unlikely to be carried over to the United States.
Many ultimately depend on what the winter weather brings. However, the United States is the world’s largest producer of natural gas and is in a better position towards the colder months, given that inventory levels are not as depleted as Europe.
Francisco Blanche, Head of Quantitative Investment Strategy for Bank of America Merrill Lynch’s Global Commodities, Equity Derivatives and Cross-Assets, told CNBC last week: “Exchange”. “The United States is far more isolated from this global energy trend than the rest of the world,” he added.
That doesn’t mean that US prices don’t fluctuate. Natural gas futures settled at their highest levels since December 2008 on Tuesday. Wednesday’s deal traded as high as $ 6.466 per British Thermal Unit (MMBtu).
Since then, natural gas delivered in November has eased from that level, but it is on track for the seventh straight week of growth. The deal is currently trading at around $ 5.63 per MMBtu. This is more than double the price at the beginning of the year.
However, the movement overseas is far more extreme. Analysts at Deutsche Bank pointed out that prices have risen five-fold in Europe, while prices have risen about 1.5-fold in the United States and Asia. In Europe, the surge in natural gas prices is comparable to oil trading at around $ 200 a barrel.
“We must not underestimate the importance of these moves to inflation, growth and external accounts,” the company wrote in a note to its customers. “These price fluctuations are a big problem.”
Coal and oil prices are also skyrocketing. West Texas Intermediate Crude Oil Futures, US oil benchmark breaks through $ 80 per barrel On Friday for the first time since November 2014.International benchmark Brent crudeMeanwhile, it is trading at the highest level since 2018. Analysts say rising natural gas prices could even encourage utilities to replace fuel with oil.
More generally, many factors have spurred higher prices for commodities such as natural gas, oil and coal.
Demand is recovering as the economy returns to business and consumers return to pre-pandemic activity. At the same time, producers suffering from the unprecedented recession of 2020 are lagging behind in increasing production.
Inventories in Europe were below average for the fall, as the winter of 2020 was colder than expected and longer than expected. Moreover, slow wind speeds and dry conditions squeezed the energy output of renewable energies. Carbon offsets are expensive and the continent has moved away from coal-fired power plants. In short, everyone was suddenly competing for natural gas.
European gas production has declined in the last two decades and the continent is now dependent on imports from Russia. This week, President Vladimir Putin said the country is in what is called a politically motivated move and has limited supply to Europe this year. Russia has the potential to increase production To ease the tensions in Europe.
Europe is not the only country in need of supplies.Countries including China Dependence on coal.. In some cases, freight is bypassing Europe for Asia where better prices can be obtained.
The Oxford Institute for Energy Studies summarized the confluence of these factors and pointed out that it was creating “this perfect storm.”
The United States has its own power problems, Texas last winter When millions of customers are left in the dark for days, it is unlikely that the same price hike and energy crisis will occur in Europe and Asia.
“”[The U.S.] Robert Thummel, managing director of Tortoise Ecofin, said the shortage was not due to the shortage, but rather to the shortage. Due to lack of infrastructure — especially for liquefied natural gas.
“You won’t see the US rescue here because neither the US nor the European side, and most importantly the Asian side to solve this, has enough infrastructure,” he said. Added.
After all, Thummel said all natural gas price forecasts depend on the weather. Prices can remain slightly higher in the range of $ 3 to $ 4 in normal winters, but can recede between $ 2.50 and $ 3 in warmer temperatures than expected. Conversely, when temperatures drop, prices can skyrocket to double digits.
Although the United States is in a better position than Europe, which is heading for winter, such volatile fluctuations in overseas energy markets have a chain effect around the world. This week, Credit Suisse raised its fourth-quarter price forecast by more than 60%, from 3.50 MMBtu to 5.75 MMBtu.
“The short-term settings for winter stocks and the increasingly tight fundamentals of global demand have proven to be more bullish than we expected,” the company said in a note to its customers. wrote. The new target is higher than the average price in recent years, but still below the $ 6 level of natural gas last week.
Meanwhile, JP Morgan raised its 2022 average annual price forecast from 1.70 MMBtu to 4.81 MMBtu with a note titled “Unthinkable Upward, Limited Downward”. The company definitely pointed out that it is not common to adjust the forecast just before the winter weather forecast becomes available. But this time it was guaranteed. Analysts said there was an “absolute need” to adjust the forecasts given the “risks that are plagued this balance at this time.”
“We go where the US supply and demand balance takes us, and it takes us to places that haven’t been visited for quite some time,” the company said. In the current quarter, JP Morgan expects an average price of 5.50 MMBtu, which will bring an average price of 3.65 MMBtu in 2021.
While the energy crisis is likely to be the main driver of price behavior, some volatility has forced Wall Street companies to short futures into large rallies and then cover their positions. There is also a possibility.
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Natural gas prices are skyrocketing worldwide.Meaning for the United States
Source link Natural gas prices are skyrocketing worldwide.Meaning for the United States