Dash for gas sparks oil switch, forces businesses to curb output across Europe, China

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Dash for gas sparks oil switch, forces businesses to curb output across Europe, China

On Thursday, wholesale gas prices in the United Kingdom had soared to a record high as a switch to crude oil, which has been hovering at a multi-year peak as well amid a demand-surge, had been driving major energy suppliers across the Europe out of business and forcing factories to limit output, while an industry group in UK had called on a swift Government action to ensure that there would be no supply disruptions over the Winter.

In point of fact, latest leg of sweeping price-surge in natgas prices, in particular in Europe, came forth as a number of key fundamentals such as a steep lag in stocks, a decline in supply from Russia alongside infrastructure outages among others, had been pushing suppliers on the brink of collapse.

Soaring natgas prices hit output, push suppliers out of business

On top of that, several analysts were quoted saying on Thursday after UK wholesale gas prices had spiked to a new record, that, a relentless rise in natgas prices this year would more likely to ramp up demands for global crude oil by more than hundreds of thousand barrels per day, which in effect would likely to jam gas supplies further as more countries were reportedly planning to a rapid shift to crude oil to generate electricity over this Winter.

Apart from Britain and Spain, where record high natgas prices had stalled productions in a number of industrials like of steelmakers alongside fertilizer plants among others, potential impact of the shortage had been spanned across China, too, with authorities reportedly restricting power supplies to certain locations.

Meanwhile, addressing to the extent of latest leg of blowout rally in natgas prices, a Chief SEB Commodities analyst, Bjarne Schieldrop, said, “This has never happened before at such a global scale. The market has always tried to substitute from costly oil to much cheaper natural gas.

Although, a steep rise in natgas prices would likely to lift up electricity prices in Britain, where a 40 per cent of the country’s entire electricity generation depends on natgas alongside other eurozone countries, the price-hike has been seen as a boom for several energy monoliths like of Royal Dutch Shell that had already projected a cashflow boost over a sharp pick-up in gas alongside electricity prices.