NatGas Prices Rising Rapidly in Europe

NatGas Prices Rising Rapidly in Europe
Rigzone's regular energy prognosticators look at the natural gas market, the energy transition, weather patterns and more.

(The views and opinions expressed in this article are those of the attributed sources and do not necessarily reflect the position of Rigzone or the author)

In this week’s preview of what to watch in oil and gas markets, Rigzone’s regular energy prognosticators look at the natural gas market, the energy transition, weather patterns and more. Read on to find out the full range of topics and trends the market observers will be on the lookout for this week.

Tom McNulty, Houston-based Principal and Energy Practice Leader with Valuescope, Inc: Natural gas prices are rising rapidly in Europe, and we are heading into the cold weather season. The trend I expect to see is that there will be more questions raised about the velocity of the energy transition there, not the ultimate objective. The goal of a move away from fossil fuels in Europe is not likely to change, but the speed will have to. Natural gas is a critical energy source for Europe, right now, and attempts to remove it too fast will cause a lot of problems. For one thing, if there are power shortages in Europe this winter, coal fired generation from Eastern Europe will be used and this defeats the purpose of the EU’s goals.  

Jon Donnel, Managing Director, B. Riley Advisory Services: Chevron hosted a webcast last week outlining its plans to reduce its carbon emissions over the coming decade, while simultaneously tripling its planned capital spending on lower carbon energy business between now and 2028. The company was also very clear that it remains focused on achieving high returns on invested capital and returning cash to investors through dividends and share repurchases. Adequate returns on investment will ultimately be critical for companies to achieve success through the energy transition and the presentation included an example of how this can play out between the operators and service companies. CVX noted that all of its leased rigs and frac spreads in the Permian are now electric, dual fuel, or natural gas powered. This lowers Chevron’s emissions without impacting capital spending (good news for CVX). However, the service providers need to provide this upgraded equipment and presumably also make acceptable, high returns, which implies higher pricing than they have been receiving over the past few years (higher costs, lower returns for CVX). It will be interesting to see how this dynamic plays out and what budgets look like next year. Will the operators and service companies share the higher returns that come with $70 oil, will there need to be more consolidation to cut costs from the system, or will commodity prices just continue to increase and everyone wins?

Tom Seng, Director – School of Energy Economics, Policy and Commerce, University of Tulsa’s Collins College of Business: With each passing day, more production offshore and, refining capacity onshore, return to operation. However, the tropics continue to remain active as we just saw with Nicholas. For both CL and NG this week, there are some technical signals to watch. Futures prices for both commodities are trading at, or near, the upper-limits of the technically significant Bollinger Bands, which represent 2-Standard Deviations above, or below, the Mean. Any bearish fundamental news could spark a technical sell-off.

Barani Krishnan, Senior Commodities Analyst at More noise from Ida as this crisis doesn’t seem to be ending soon.

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