Strategist on oil prices in winter, China and Europe energy crisis
CNBC’s strategist said that winter is likely to cause an unexpected spike in oil prices, but that OPEC (and its allies) will keep their previous pact.
OPEC+ — the Organization of the Petroleum Exporting Countries, with their allies including Russia — have been under pressure from top consumers, such as the United States and India, to add extra supplies after oil prices surged 50% this year.
But the oil cartel agreed on Monday to stick to an existing pact to hike oil output by 400,000 barrels per day (bpd) in November, shrugging off calls to pump more oil.
John Driscoll is the chief strategist of JTD Energy Services. He said that the decision to OPEC+ was a prudent move, considering the current energy crisis and potential supply disruptions.
“What do I think?” [is] more concerning to everyone out there … what happens during the winter? Will we have an Arctic freeze again? Driscoll said Tuesday on CNBC’s SquawkBox Asian that another Arctic freeze was possible.
He pointed to the shortage of fuel in the U.K. — with long queues of cars waiting to buy gas, as well as “fist fights.” The U.K. people have been panic buying fuel,This can lead to fuel shortages and strain on the supply chain.
BURY ST EDMUNDS SUFFOLK UNITED KINGDOM – 2021/09/25. People filling up their vehicles at BP stations during fuel shortage in Bury St Edmunds.
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Driscoll stated that “when you get into winter you really need to worry about this non-discretionary desire.” It refers only to daily essential purchases for goods and services.
Driscoll stated that a low inventory or “any type of supply chain problem” is particularly concerning.
The panic buying of fuel has caused supply chains to be strained. This is partly due to the shortage of truck drivers in Britain and Britain’s new trade relations with the EU. This has led to the U.K. resorting to bringing in the army to deliver fuel
“You could see an off the charts spike — that is one scenario out there,” said Driscoll, of oil prices. I don’t hear anyone talking about the possibility of mildly subdued winters. We could have a wild ride with all this uncertainty about weather and climate.
Oil prices hit a three-year highAfter the OPEC+ DecisionBrent reached $82.47/barrel on Wednesday morning Asia time, while WTI stood at $78.84.
However, energy prices are already on the rise this year. Crude oil rose more than half a year ago, increasing inflationary pressures.
Driscoll indicated that while it was possible to see oil prices rise up to $100 per barrel, this is not sustainable.
That scenario is lower in probability. If everything fails, such as Arctic weather or if there are problems with the deliveryability and supply chain, then that is a possibility. He said that while it is possible, I do not believe this scenario will be viable.
Driscoll pointed out that the energy crisis in ChinaThis caused widespread chaos when local authorities ordained power outages at numerous factories.
While the nation struggles with energy scarcity, the demand for natural gasAccording to Reuters reports, the price of coal rose after Beijing directed energy companies that they ensure enough supply to keep winter outages at bay.
Europe is also struggling with its own problems. power crisis with a massive gas crunch.
This confluence causes a shortage of gas. is set to boost demand for oilAnalysts warn that it will be colder than usual this winter.
— CNBC’s Sam Meredith and Chloe Taylor contributed to this report.