Natural gas shortage pushes up oil demand from power plants

Recently, the International Energy Agency (IEA) stated that the soaring prices of natural gas and coal are forcing power generation companies and manufacturers to switch to oil, a move that may increase global oil demand by 500,000 barrels per day

In its closely watched monthly market report, the IEA raised its forecasts of global oil demand for this year and next year by 170,000 barrels per day and 210,000 barrels per day, respectively

The IEA stated that the continued recovery of the global economy has caused severe shortages of natural gas, liquefied natural gas and coal supplies, triggered a sharp rise in energy supply prices, and is triggering a large-scale switch to petroleum products and the direct use of crude oil for power generation

In addition, relatively low natural gas inventories in Europe, low wind levels, economic recovery after the epidemic, coal shortages in China, and cold winters in the northern hemisphere may all drive fossil fuel prices soaring

IEA Director Birol said that extreme weather events have also made energy shortages worse, such as Hurricane Ida

Analysts said that a trend called "gas-to-oil" is heating up, that is, power plants that use petroleum as fuel are put into operation, or those power plants that can be transformed into crude oil products are transformed back

The preliminary data cited in the IEA report shows that the demand for fuel oil, crude oil and middle distillate oil in power plants in China, Japan, Germany, France and Brazil is abnormally high

Even so, the supply of oil-producing countries is still restricted

At the same time, although OPEC+ has increased its production, IEA stated that OPEC+’s daily output in the fourth quarter of 2021 will be 700,000 barrels less than the global demand for its crude oil