Natural gas crisis spread around the world, crude oil or will benefit from this?

Recently, the global natural gas supply is in short supply, the price has soared, accompanied by a shortage of electricity in various countries and an increase in
electricity prices.
As winter approaches, electricity demand increases, and many countries around the world face an increasing
risk of power outages.

What is more troublesome is that the squeeze of the supply chain and the global loose monetary policy will make the already scarce energy under the influence of inflation appear larger, global production has not fully recovered, but demand has returned to close to the pre-epidemic level, there is an imbalance between supply and demand, triggering the fear of power outages in Europe and the
United States.

In some places, natural gas prices are already very expensive, and the shift in consumption from gas to oil could increase daily demand by as much as 925,000 barrels, and governments are turning to increasing strategic reserves of
crude oil.

Why is there such a shortage of natural gas?

The past one or two years have been a year of disaster for all countries around the world, with fires, locust plagues, epidemics and other disasters sweeping the world
.
Climate change has been blamed by environmentalists as the main culprit of natural disasters around the world
.
As countries strive to reduce the use of polluting coal and thus use cleaner energy, countries are more dependent on natural gas
than ever for home heating and industrial power generation.
But there is not enough fuel to fuel the post-pandemic recovery, and natural gas stocks could be depleted before the arrival of the cold months, while countries are trying to compete for gas supplies
at higher prices as exporters such as Russia take various steps to reduce exports.
As a result, when temperatures drop, the crisis of fuel shortages will become even worse
.

At present, the world is facing another serious problem, that is, the lack of electricity, many places in China have begun to use industrial electricity due to lack of electricity, and production capacity has dropped
sharply.
Factories in some areas have implemented temporary power curtailment measures
for one day off and six days off.
As the world's largest energy country, the lack of electricity in the United States may make many people unthinkable
.
The pressure on electricity consumption in various states has increased greatly, and the water level of a large number of reservoirs has decreased, resulting in the reduction of power generation by major power companies in the United States, and as a last resort, the major power companies in the United States have begun to cut off electricity, and some urban areas in Washington state have begun to use the method of regional power outages to ensure power supply, and California may face power
outages in 220,000 households thereafter 。 According to relevant data, the electricity price of the northwest hub of the Atlantic Ocean has soared by 435%, up to 334.
22 US dollars / MWh, the price of electricity has soared at the same time, the price of natural gas has also soared, because of the reduction of hydropower, the major power companies can only increase the amount of natural gas power generation, the increase in demand for natural gas has led to a sharp rise
in prices.
Not long ago, the price of natural gas futures increased by 296% year-on-year, and professional analysis believes that by the arrival of the heating period this winter, the price of natural gas will rise
.

Energy shortages on the continent have led governments to warn of power outages and forced closures
of factories.
European fuel stocks are at historic lows
at this time of year.
Pipeline gas transmission from Russia and Norway has been restricted, reducing wind turbine production compared to previous years of calmer weather, while aging nuclear power plants in Europe are being phased out or shut down, making natural gas even more necessary
.
As a result, European gas prices have soared by nearly 500 percent over the past year and are near all-time highs
.

The cold winter may further exacerbate the shortage of natural gas

Winter is usually the peak period for natural gas use, because the demand for electricity and heating in winter is one
of the seasonal factors affecting natural gas prices.
Even the average cold winter in the Northern Hemisphere is expected to push up gas prices
in much of the world.
Economies such as Pakistan or Bangladesh, which cannot afford fuel, may come to a standstill; Households in Brazil can face high electricity bills, among other things
.

Since it is too late to increase fuel supplies, policymakers around the world are praying not to experience extreme cold this winter
.
Rising energy costs and squeeze supply chains, while supply chains and countries' loose monetary policies will further boost inflation
.
This has made gas supplies worse, leaving more central bankers questioning whether the rise in inflation is really as short
as they predicted.

Amos Hochstein, senior adviser on energy security at the U.
S.
State Department, said in an interview: "If the winter is really cold, parts of Europe will not have enough natural gas for heating, for some countries, this will not only lead to economic recession, but also affect the actual heating effect, which is closely related
to everyone's life.
" 。 According to the data provided by the U.
S.
Energy Information Administration, U.
S.
natural gas production began to decline after March 2019, and by March this year, there were 48 states in the United States, and there were 11 consecutive months of production cuts, at the same time, U.
S.
natural gas inventories are decreasing, compared with last November, today's natural gas inventories are reduced by 16%.

Natural gas is soaring, why is crude oil gaining as a result?

There is often a high degree of positive correlation between crude oil and natural gas prices during special periods
.
This seems logical, especially since natural gas is often a by-product of extracting crude oil
.

Market data show that in the past year, the price of liquefied natural gas in Asia has soared nearly 6 times, and the increase in European natural gas has been even more amazing, with prices in July rising more than 10 times compared with May last year, and even the current gas price in the United States, which is rich in natural gas resources, has hit the highest level
in nearly 10 years.

On the other hand, Brent crude oil has soared more than 50% this year to hit $80 at one point last week as the world's major economies are gradually emerging from lockdowns caused by the pandemic and crude oil supplies are being restricted
.

JPMorgan Chase & Co.
recently said that the worsening natural gas crisis in Asia and Europe will stimulate more power plants to switch to oil-based fuels, pushing crude oil prices to $84 a barrel
by the end of the year.
The $84/barrel price target is 7.
7 percent higher than the year-end price target given by Xiaomo, and the team of analysts, including Natasha Kaneva and Gregory Shearer, noted that oil prices may even rise higher
.

In some places, natural gas prices are already very expensive, and the shift in consumption from natural gas to oil could increase daily demand by as much as 925,000 barrels, which will push up oil prices
.

However, in the natural gas crisis, the increase in oil demand is not unlimited, 925,000 bpd may be close to the ceiling, which means that Brent crude oil prices will be more difficult to rise more than $90 / bbl
.
This price expectation is relatively conservative compared to Bank of America and Goldman Sachs
.

The Bank of America said the global energy crisis could push oil prices above $100 a barrel for the first time since 2014 and could trigger a global economic crisis
.
In oil equivalent terms, natural gas prices have soared nearly twice
that level.

At present, countries around the world are still paying attention to the current energy crisis while seeking solutions
to the winter power shortage.