European coal, carbon and gas prices have all hit record highs as crude oil surged above $ 80 a barrel, making it clear that the world is heading towards an energy crisis that could weigh on economic growth. .
Brent, the international benchmark, rose 0.9% to $ 80.22 a barrel Tuesday morning, hitting a three-year high for the second day in a row and bringing crude’s gains for the year to nearly 55% .
European benchmark gas prices for delivery next month rose another 10%, meaning costs have doubled since mid-August, while the price of offsetting carbon emissions – through contracts called offsets – continued to increase, exceeding 65 â¬ per tonne in intraday trading on Tuesday.
âWe are not only looking at the UK and Europe, but also a potential global energy crisis as winter approaches,â said Robert Rennie, Global Head of Market Strategy at Westpac.
US natural gas prices jumped 10% to over $ 6 per million UK thermal units, their highest price in seven years, before retreating amid forecasts of warmer-than-expected weather conditions and lower demand in the coming weeks. By early afternoon in New York, the first month’s contract, which was due to expire on Tuesday, had risen only 1% to $ 5.77 / mBtu.
Analysts said the surge in prices – with the first month’s contract up nearly 200% in one year – was the result of a decrease in drilling by U.S. shale producers, a disruption in the supply following hurricanes in the Gulf of Mexico and rapidly increasing demand, which has left natural gas inventories well below the five-year average.
“[The price] could go much higher if the weather is as cool this winter as some predict, âsaid Andrew Gillick of energy consultancy Enverus.
Soaring energy prices in the United States have already raised concerns in the White House, with President Joe Biden calling earlier this month for an investigation into why average gasoline prices – in up nearly 50% last year to about $ 3.19 a gallon – are so high.
Biden’s national security adviser Jake Sullivan visited the Middle East this week for talks with Saudi Crown Prince Mohammed bin Salman, though it is not known whether oil prices were on the rise. agenda.
The general recovery in energy markets comes against a backdrop of limited supply and growing competition between Europe and China, which have pushed gas prices to record highs in recent weeks.
The combination of soaring thermal coal prices, which have risen 96% in China this year, and central government targets to reduce carbon emissions has increased Chinese demand for liquefied natural gas deliveries as a more option. clean for coal power.
The clean energy campaign by Chinese authorities, as part of an effort to avoid an annual sweltering haze as Beijing prepares to host the Winter Olympics in February, has contributed to its own electricity crisis, resulting in widespread blackouts that disrupted plant activity and left many homes without electricity in the northeast of the country.
Record gas prices due to declining global production are now spilling over into oil markets and are expected to drive crude higher as some industries turn to using oil to generate electricity.
In China, Shanghai crude futures are up 27% from a low in late August, forcing Beijing this month to announce its first public auction of state oil reserves to refiners national.
With U.S. crude inventory levels well below average ahead of the year-end peak consumption period, Rennie predicted that oil could even face a global shortage as countries eased further coronavirus travel restrictions.
âAdd to that the power outages in China and concerns about inventory levels around the world, and it’s understandable that we’re seeing upward pressure on crude,â Rennie said.
The tightening gas market is also pushing up the cost of coal in Asia and Europe, which was already high in part due to the reluctance of banks and investors to fund new projects.
The price of high-quality Australian thermal coal – the marker of the vast Asian market – hit an all-time high on Tuesday after a shipment for delivery in December was bought for $ 204 a tonne on GlobalCoal, an e-commerce platform. This eclipsed the previous record for coal mined in New South Wales of $ 201 in July 2008.
Coal delivered to Europe is also trading at $ 200 a tonne as utility companies scramble to secure cargoes ahead of winter.
Despite targets for reducing carbon emissions, which means most governments are committed to reducing coal use, pricing agency Argus Media has predicted that consumption in Europe could reach its highest point. high this year since 2016 though coal-fired power generation capacity in Germany, France, Spain and the UK is operating at 80 percent between October and the end of March.
The growing energy crisis prompted Goldman Sachs this week to project a global energy rally for the months to come.
The investment bank predicted that Brent would hit $ 90 a barrel before the end of the year and warned on Tuesday that rising input costs, rising gas prices and weaker growth were likely to weigh on the market. European business profit growth for 2021. “When growth slows, it becomes more difficult for companies to pass on higher input costs, which is the main risk to net margins,” he said.
In China, state media have tried to allay concerns about the impact of the energy crisis on livelihoods and industry by promising an early end to the gradual blackouts.
An article on the front page of the Economic Information Daily, a newspaper run by state-run Xinhua News Agency on Tuesday, said authorities were taking action to alleviate power shortages and prevent unplanned blackouts. .
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