Experts have warned that short supplies of natural gas in Europe could cause the rest of the world to pay big heating bills in an effort to stay warm this winter.
Natural gas prices rose more than 35 percent in the past month amid short supply and demand resumed as pandemic-hit economies around the world sparked fears that temperatures may rise. But there is not enough gas stored for winter. Especially cold in the Northern Hemisphere.
Some experts are now pointing to Europe, where supply is 16 percent below the five-year average, a record low for this time of year.
John Kilduff, partner at Again Capital, told CNBC that people start throwing the word ‘crisis’ around when it comes to Europe.
“Europe is well behind with eight balls to go in the winter season. It’s going to focus on this commodity that has been overlooked for the past several years,” Kilduff said.
Things could even get worse for the United States if shortages in Europe become more severe, with prices possibly doubling.
“If it’s a cold winter, gas just won’t be tight. It will be very tight,” said Daniel Yergin, vice president of IHS Markit. , or it will be reflected in the price.”
Meanwhile, Goldman Sachs commodity analyst Samantha Dart noted last week that natural gas prices could rise above $10 per mmBtu if the coming winter turns out to be colder than usual.
“While a small cooling deviation from the average would be resolved through gas-to-coal substitution against Appalachia coal in the $5-$6.50/mmBtu gas price range, anything close to the full standard-deviation from the average would trigger a price spike. Will cause demand destruction with gas above $10/MMBtu,” Dart said.
According to some strategists, if the fall and early winter prove to be mild and more gas is put into storage, which could push prices down, the scenario could become less bleak.
“We tend to lean toward a lot of risk for price moves rather than higher and higher sustained prices,” Christopher Looney, commodity strategist at RBC, told CNBC.
But it’s not just Europe that is grappling with declining natural gas supplies. According to the Energy Information Administration, gas levels in U.S. storage are down 7.4 percent from the five-year average and 16.8 percent below levels at this time last year.
In addition, US industry is also suffering from reduced production due to Hurricane Ida, which affected 90 percent of natural gas production, while more than 75 percent of the Gulf of Mexico remains off natural gas, according to an S&P analysis of September 13. is in accordance. Global Plates.
Rising international demand for US exports of liquefied natural gas (LNG) has driven up prices of natural gas, which is used for heating and generating electricity, as well as for processing chemicals, fertilizers, paper and glass. Goods.
The situation in Europe has attracted the attention of senior US energy adviser Amos Hochstein, who warned that “life is at stake” in Europe this winter amid short supply and the threat of short supply.
“If you get a real cold by January and February, you may run out of supplies. And that’s where I’m concerned,” Hochstein told reporters on Friday, noting that Russia “supplied the market more than its traditional supply” which also contributed to the rise in prices.
“It is not just about some geopolitical game. People’s lives are at stake,” he said.
This News Originally From – The Epoch Times