Swiss-based commodity trading giant Trafigura Group has warned that Europe’s severely depleted natural gas reserves will lead to a cold and dark winter, with the risk of widespread power outages.
The demand for commodities such as natural gas, oil, coal, and other vital metals including cobalt, nickel, and copper, has been sent surging as the global economy continues to recover from the Covid-19 pandemic. As such, Trafigura warns that prices will escalate substantially, further adding to already-mounting inflationary pressures just as Europe faces a worsening energy crisis ahead of the winter season.
Gas prices across Europe have been sent soaring to record-highs this fall, and will likely continue their upwards momentum, especially after Germany suspended the certification process of the Nord Stream 2 pipeline. Although some EU countries have attempted to alleviate surging energy costs via subsidies and price caps, Trafigura CEO Jeremy Weir cautions such moves might not be sufficient.
“We haven’t got enough gas at the moment quite frankly, we’re not storing for the winter period. So hence there’s a real concern that there’s a potential if we have a cold winter that we could have rolling blackouts in Europe,” Weir was quoted as saying by Reuters. As a result of surging natural gas prices, the demand for alternative energy sources such as crude oil has also been sent upwards.
However, switching from natural gas to crude oil for energy is not going to be an easy task, warns Weir. Climate change initiatives by major governments have diverted investment away from new fossil fuel production, which will only create added price pressures for the commodity. “I think people need to recognize it’s not a situation where you might just flick the switch and you increase production. There’s a lot of investment, it takes some time to do that,” he explained.
The recent rally across natural gas markets has boosted crude prices by more than 50% since the beginning of the year, with a barrel of oil now trading upwards of $80. “I think we have got a bit of an issue looming on oil prices on a long-term basis, I think $100 plus on oil is very possible,” Weir said.
Information for this briefing was found via Reuters. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.