In 2022, international energy prices will exceed expectations

In the context of limited supply and rising demand, international energy prices will fluctuate upward
in 2021.
Prices of crude oil, natural gas, electricity and more hit multi-year highs
.
Looking ahead to 2022, multiple factors will continue to churn the global energy market, and despite bullish sentiment, the outlook for the global energy market remains highly uncertain
.

Multiple factors affect the supply and demand game of oil prices

In 2021, as the world economy gradually recovers from the impact of the new crown epidemic, global energy demand has rebounded significantly but supply growth has been limited, so international oil prices have entered an upward channel
.
On December 31, the main contracts of New York Mercantile Exchange light crude oil futures and London Brent crude oil futures closed at $75.
21 and $77.
78 per barrel, respectively, up about 55% and 50%
from the end of 2020.

International oil prices are still highly sensitive to the epidemic situation, and changes in the epidemic affect demand expectations and trigger fluctuations
in oil prices.
On November 26, 2021, the day of the World Health Organization's warning of the mutated new coronavirus Omichron strain, international oil prices fell by more than 10%, and the whole of November fell by about 20%.

Oil prices have recovered somewhat as market concerns have eased, but remain significantly below the $86 barrel high reached in October last year
.

In its latest oil market report, OPEC maintained its forecast of an average global oil demand growth of 4.
2 million barrels per day in 2022, arguing that the impact of
the Omikron strain will be mild and short-lived.
OPEC expects global average daily crude oil consumption to be 100.
8 million barrels in 2022, roughly unchanged
from 2019 before the pandemic.

From the supply side, if the plan to increase production by 400,000 barrels per month is implemented, the collective production cuts between OPEC and non-OPEC producers are expected to be cleared
in September 2022.

The International Energy Agency recently released a monthly oil market report saying that Saudi Arabia and Russia could reach record highs if production cuts from OPEC and non-OPEC producers are finally completely lifted
.
Coupled with the rise in crude oil production in the United States, Canada, Brazil and other countries, the global average daily crude oil supply will increase by 6.
4 million barrels in 2022, up from 1.
5 million barrels in 2021
.

JI believes that oil prices
have been supported by cautious production increases by oil-producing countries.
But as supply increases, commodity prices will come under pressure
if the pandemic disrupts the pace of economic recovery.
Commodity prices are expected to fall
in 2022 as supply and demand become more balanced.

Goldman Sachs expects oil demand to continue to rise in 2022 and 2023 as demand for aviation, transportation and infrastructure
rises.
Daming Courwaland, Goldman Sachs' head of energy research, believes that the Omi Kron strain has limited economic impact and expects Brent crude oil prices to remain around $85 per barrel in 2022 and 2023, and may even break through $
100 per barrel.

The U.
S.
Bureau of Energy Information expects supply growth to exceed global oil consumption in 2022, with Brent crude futures averaging around
$70 a barrel for the full year.

Zhang Longxing, director of the oil products division of Shanghai Oil and Gas Trading Center, analyzed that under the impetus of tightening liquidity in the capital market and OPEC production increase, Brent crude oil prices may fall, and in the second half of the year, it is necessary to pay attention to the prospects for the recovery of Iranian crude oil exports and the growth of shale oil production in the
United States.
Brent crude oil prices are expected to fluctuate widely throughout the year, with the average price in the first half of the year or higher than in the second half of the year, and the annual volatility range may be $60 to $
85 per barrel.

Natural gas prices may continue to be high

At present, the energy crisis in Europe is intensifying, and the mismatch between supply and demand has caused prices to soar, and the wholesale price of natural gas has risen to five or six times
that of the beginning of 2021.
The proportion of natural gas power generation in Europe is high, and the price of natural gas has soared, and the price of electricity has soared
.
Europe's energy dependence on foreign countries is high, and the iterative succession of traditional energy and new energy is facing challenges, which also affects the stability
of European energy supply.

According to the European Natural Gas Infrastructure Association, the entire European gas inventory is currently only 68% of the full load level, well below the 10-year average
.

Alexander Nazarov, an analyst at Novatek in Russia, said that since the beginning of winter, European natural gas prices have risen all the way, which is mainly related
to the sharp increase in market demand with seasonal changes and the limited supply capacity of European liquefied natural gas.

HEI expects European gas prices to start to fall after the winter peak of demand, but is expected to remain seasonally high for most of 2022
.

Economists in the IMF's research department believe that seasonal pressures will ease after the end of winter and that natural gas prices will return to normal in the second quarter, but uncertainty remains high
.

Ivan Timonin, an expert at Moscow-based Wigon Consulting, said that global natural gas market demand will continue to increase in 2022, and the decline in natural gas prices will need to wait until the weather warms and demand slows down, the "Nord Stream-2" gas pipeline is put into use, and the newly commissioned liquefied natural gas project in the United States reaches full capacity
.