The COVID-19 pandemic ravaged the world’s energy demand in 2020. In response, energy producers slashed their capital spending on expanding output. However, now that energy demand has recovered, producers cannot keep up to provide additional supply. Analysts said this resulted in prices of coal, natural gas, and crude oil soared to record highs in some key markets.
In addition, the weather has worsened the shortages. Cold winter in the Northern Hemisphere in 2020/2021 boosted demand for natural gas for heating. A late winter storm in Texas in February 2021 dampened upstream gas and oil output in the region. Slow wind speeds in Europe in August-September 2021 lowered wind farm output, boosting demand for other electricity fuels, especially gas. Meanwhile, hurricanes disrupted offshore oil and gas production in the Gulf of Mexico since late August 2021.
Compared to a year earlier, front-month gas futures prices have climbed more than 600% in Northeast Asia, over 500% in Europe, and around 140% in the US. US gas inventories are 5% lower than the pre-pandemic seasonal average, while European stocks are 15% below average. US petroleum inventories are 5% behind the pre-pandemic seasonal average. OECD commercial inventories are also around 5% lower than the 2015-2019 seasonal average. In China, coal miners are ordered to boost output as utilities reported low coal inventories.
