Inflation across major global economies has been running rampant over recent years, fueled by the COVID-19 pandemic and the energy crunch, with central banks forced to tighten their monetary policy and raise interest rates in response.
Over the past two decades, gas pricing in Europe has moved away from oil indexation towards hubs as the preferred price formation mechanism driven by supply and demand, with gas-on-gas pricing making up 77% of gas volumes in 2021.
Just a quick glance at the financial results of the five oil giants will be enough to realize that last year’s energy crisis, which is still reverberating across global markets, has been a bonanza for them.
Though in December growth in energy prices in Europe decelerated to 25.5% YoY, the lowest rate in 2022, local consumers remain under immense pressure and are scrambling for ways to cut their energy use.
While experts reflect on the effects of the existing restrictions on Russian crude, another EU embargo, accompanied by a price cap, is expected to come into force on 5 February. And one may only guess how this will affect market prices globally.
Will Russia cut its oil output? The imminent collapse awaited in 2022 never materialized. However, official estimates suggest that production will decline by 500,000-700,000 b/d in early 2023. And it’s hard to predict the reaction from global markets.
As we mentioned earlier this month, analysts did not anticipate a substantial rise in lithium-ion battery (LIB) prices in 2022, which were projected to grow only 2% YoY. However, more recent estimates suggest that growth may be higher than expected in June.
Market mechanisms are giving way to intergovernmental regulation. One of the examples is a price cap of $60 per barrel introduced this week by the G7 for Russian crude oil. In retaliation, Russia is planning to ban sales to countries applying this restriction.
In our previous Energodigest, we wrote about the IEA’s World Energy Outlook, which is now followed by the World Oil Outlook, a similar set of forecasts authored by OPEC. How these forecasts have changed over the past year?
The leaks discovered last week in two natural gas pipelines in the Baltic Sea have not only prompted major concern among climate activists, but have also brought renewed limelight on the ailing gas market.
Oil has lost 20% of its value since June, largely on fears of waning demand in response to global recession and further monetary tightening by many regulators, including the Fed with its ‘hawk’ rhetoric.
While at the beginning it seemed that supply disruptions would only last for a couple of months, it’s now becoming clear that the lack of gas will remain a pressing issue in the coming winter and it’s unlikely to be resolved until 2024.
Import substitution is the burning issue not only for Russia. Energy-dependent countries are now racing to find alternatives to Russian supplies, with some of them even restarting mothballed coal mines.