![]() ![]() “OPEC+ has provided a price put which should serve as a clear reminder that they will stop stockpiles from building should the world economy slump into a severe recession.” “We continue to warn of significantly tighter markets at year-end,” said Amrita Sen, chief oil analyst at consultant Energy Aspects. ![]() Some 44% of respondents believe that oil prices are failing to reflect the realities of supply and demand, a disconnect recently identified by Saudi Energy Minister Prince Abdulaziz bin Salman. The kingdom and its partners are likely to either hold production steady or cut rather than increase it over the next six months, according to the survey. The alliance demonstrated its readiness to intervene by announcing a symbolic production cutback earlier this month. Even if a global economic slowdown causes oil prices to falter, they see another line of defense in the OPEC+ producers’ cartel led by Saudi Arabia. Norwegian energy company Equinor ASA warned that margin calls of at least $1.5 trillion are straining energy trading and pushing governments to provide greater liquidity buffers. About 46% expect energy crisis to accelerate the pace of green power generation.Įnergy price volatility is itself posing a risk to the financial system, with the rising prices forcing utilities to put up more collateral for fuel-delivery contracts purchased with loans. Most respondents expect oil prices to remain between $70 and this year’s peak of $139, with only 10% seeing crude surging above that level. In the oil market, there are already signs of demand destruction taking place, with crude prices retreating about 25% over the past three months. Demand in China, the world’s second-biggest consumer, remains overshadowed by the property crisis and virus restrictions. Nonetheless, bullish investors may have their nerves tested in the months ahead as the inflationary wave batters the global economy. The “global shortage of gas, hesitancy about new investment in new gas production” and the EU’s “political decision to phase out its dependence on Russian gas altogether” are driving the tightness. “The European gas market is likely to remain tight throughout the 2020s,” said Katja Yafimava, a senior research fellow at Oxford Institute for Energy Studies. Economists increasingly predict a Euro-area recession in the coming quarters as the rising cost of living saps demand, undermining the pandemic rebound. could top 22% next year if natural-gas prices remain elevated. Goldman Sachs has warned that inflation in the U.K. The surge in energy prices has hit major economies with a brutal wave of inflation, which has reached record levels in the Euro-area and the hottest pace in almost four decades in the U.S. While junk-rated energy bonds are expensive when compared with the global index, the US energy debt rated at investment grade BBB is relatively attractive, trading at a higher spread than the average of its peers by rating and duration. Yet, they remain significantly cheaper than their S&P 500 peers, based on their prices relative to the earnings they’re expected to report in the year ahead. They see electricity and natural gas prices driving global inflation and expect that Russia will choke off flows of natural gas to Europe, leading to shortages of key fuels this winter.Įnergy stocks are one of the rare bright spots in the world’s equity markets, with an index of energy companies in the S&P 500 rallying more than 40% so far this year as profits surged along with oil and gas prices. Two-thirds of respondents to an MLIV Pulse survey, which includes portfolio managers and retail investors, plan to increase exposure to the sector over the next six months. Energy stocks and bonds are poised to get a fresh boost from investors positioning to benefit from the surging electricity prices and fuel shortages expected later this year.
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