Rising energy prices vs low reserve levels
High and worrying expectations reflect the markets in Europe in recent days due to the rise in energy prices, which has set the alarms to sound more when production does not reflect the necessary numbers almost with the arrival of winter.
Fearing a possible global energy crisis, operators say that countries are starting a strong race to store raw energy materials in order to meet the demands of the coming months.
The prices of electricity, gas and oil continue to trend upwards and to this list the consumption of coal as an energy generator has recently been added in Europe, reflecting this last year values of up to 210 a metric ton.
One of the factors that has driven the rise in coal prices, according to the opinion of the International Energy Agency (IEA), is the fact that the Chinese industry has reduced its consumption of coal in the framework of the fight against climate change, due to the proximity of the Winter Olympics from next February 4 in Beijing. Its industry has been forced to be highly dependent on gas production, under severe stress for geostrategic reasons.
Gas: the eternal protagonist of the market
The market assures that there is great uncertainty about the supply capacity of Nord Stream 2, (Europe's offshore natural gas system that runs under the Baltic Sea between Russia and Germany) and they start from the idea that Russia would be putting pressure on the regulator reducing gas exports to speed up administrative permits.
It should be noted that in recent years the industry has not invested enough to meet the increases in demand after the lifting of restrictions due to the covid, which has boosted the economy and has had a decisive influence on the low level of inventories.
Gas supply interruptions have been frequent in recent months, sometimes for technical reasons, for example in Norway, but also for political reasons. Russia, one of the world's leading producers, would be fulfilling its contracts with its European customers, according to the IEA, but its exports are still below their 2019 level. The Agency believes that Russia "could do more to ensure that storage reach adequate levels to cater for the winter heating season. "
For AGSI +, which compiles all the information on gas storage in Europe, they point out that for the year 2020 at this same time the stock of gas was located at 94.8% of the total capacity, today it reaches 73.9%, which gives an idea of the supply needs before the arrival of winter. In the case of Spain, the level of inventories stands at 72.8% of the installed capacity. These records are much lower than the average of the last five years.
Algeria, another of the gas market giants, has also threatened to cut off the tap of the gas pipeline that passes through Morocco to Spain, which explains that the Spanish Foreign Minister, José Manuel Albares, accompanied by a representative delegation of the sector, has announced a trip to Algiers to ensure there are no power outages.
Prices by leaps and bounds
The market reflected historical prices this last week, as is the case of a barrel of crude from the North Sea (159 liters) in the past few days exceeded $ 80, the highest in three years, and has already accumulated a 50% rise in the year, while gas, in the daily market of the European Energy Stock Exchange, which is made up of both the spot and derivatives markets, has reached 76.1 euros per megawatt hour (MWh), which represents a 73% increase compared to last August 15. Electricity in the Iberian wholesale market, for its part, has already exceeded the psychological barrier of 200 euros MWh at certain times of the day.
The investment bank estimates that oil will be around $ 90 by the end of the year, ten dollars more than it was estimated a few months ago. This review partly explains why its analysts, like Nomura, Fitch or S&P, have cut four tenths (to 7.8%) their latest forecasts on growth in China due to restrictions on energy consumption for environmental reasons . China plans to peak greenhouse gas emissions in 2030 and achieve neutrality in 2060.
Some hedge funds already report profits of up to 40% on their bet on commodities. The well-known super cycles occur when structurally, not temporary, there is a mismatch between supply and demand, as happened at the beginning of the century, when China, with an annual growth of over 8%, and after joining the WTO, boosted prices by needing huge amounts of hydrocarbons to make it work.