Owing to the demand and supply shortages, there is a hike in prices of natural gas and crude oil.
FREMONT, CA: Natural gas and crude oil prices have soared in October, 2021, rising by about 14 percent each. Indeed, oil has risen 63.5 percent since the beginning of the year, reaching a seven-year high on the back of buoyant demand and limited supply. Natural gas prices have more than tripled in Europe and nearly tripled in the United Kingdom. This has far-reaching consequences for global growth, inflation, and the real economy. An increase in demand can be clearly seen as economies reopen, i.e. more travel, manufacturing, and more, as well as pent-up released demand from last year. More significantly, this is happening at the same time as supply-side shortages.
Due to movement restrictions, natural gas, coal, and oil storages could not be replenished to the usual extent due to the lockdowns. As a result, storages were depleted during the winter as these natural resources were used to heat homes. Simultaneously, while truck drivers were considered essential employees and allowed to work, truck driver training schools were closed. As a result, there is now a severe shortage of trained truck drivers who can transport these natural resources in large container trucks, which is causing storages to be depleted more slowly in 2021 as well. Storages in Europe, particularly the United Kingdom, and parts of Asia are running below average at present.
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One can distill down the future of oil and gas prices to two main factors. FIrstly, winter season severity—current storage levels and utilization ratios of 70-75 percent would likely suffice for an average winter, but a harsh European winter would keep prices elevated. Secondly, new supply from Opec+ or the US—seems unlikely at the moment, given that Opec+ only agreed to increase production moderately at its most recent meeting.