Trafigura Warns of Power Outages in Europe This Winter
(Reuters) — Europe is at risk of power outages this winter due to insufficient gas reserves and over the long-term, oil could rise above $100 a barrel, the chief executive of commodity trading giant Trafigura said.
Demand for oil, coal and natural gas as well as metals such as cobalt, nickel and copper have soared as the global economy reopens from COVID-19 restrictions, triggering price spikes that threaten the nascent recovery.
European gas prices have hit record highs this year prompting some countries to respond with emergency measures such as price caps and subsidies but that may not be enough, Jeremy Weir said.
"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 said at the FT Commodities Asia Summit.
Russian state gas monopoly Gazprom, a major exporter to Europe, started refilling its European storage facilities last week but on Monday it booked lower pipeline capacity for December.
Some European lawmakers have accused Moscow of restricting supply to put pressure on Germany to speed up the authorization of the Nord Stream 2 pipeline. Russia has denied this.
The higher price of natural gas has boosted demand for oil with benchmark Brent crude up 60% since the start of the year, trading at above $80 a barrel.
"We are seeing a very, very tight oil market," Weir said.
Climate change has put oil companies under pressure to shift away from polluting fossil fuels and the resulting drop in investment in new production is adding to the price pressure.
"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," said Weir.
"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."
Front-month prices are about $1 higher than those in the second month, a market structure known as backwardation that indicates tight prompt supplies as the Organization of the Petroleum Exporting Countries (OPEC) and their allies continue to restrict production.
"There are some OPEC members that probably can increase supply very quickly," Weir said.
Related News
Related News
- Phillips 66 to Shut LA Oil Refinery, Ending Major Gasoline Output Amid Supply Concerns
- FERC Sides with Williams in Texas-Louisiana Pipeline Dispute with Energy Transfer
- U.S. Appeals Court Blocks Kinder Morgan’s Tennessee Pipeline Permits
- ConocoPhillips Eyes Sale of $1 Billion Permian Assets Amid Marathon Acquisition
- Valero Considers All Options, Including Sale, for California Refineries Amid Regulatory Pressure
- U.S. Appeals Court Blocks Kinder Morgan’s Tennessee Pipeline Permits
- Malaysia’s Oil Exports to China Surge Amid Broader Import Decline
- U.S. LNG Export Growth Faces Uncertainty as Trump’s Tariff Proposal Looms, Analysts Say
- Marathon Oil to Lay Off Over 500 Texas Workers Ahead of ConocoPhillips Merger
- Valero Considers All Options, Including Sale, for California Refineries Amid Regulatory Pressure
Comments