Higher demand for oil, natural gas, and coal due to colder than usual winter temperatures in many parts of the northern hemisphere is driving up the regional prices and international benchmarks of all three fossil fuels at the start of 2021.
Oil demand in rising in northeast Asia, where not only is the weather freezing, but China is increasingly using diesel generators amid a tight supply of electricity. China’s increase in oil demand amid the cold snap and factories turning to diesel power generators in light of electricity shortages have supported oil prices in recent days, analysts say.
“Winter weather is going to provide a huge boost to heating demand in the residential and commercial sectors,” Edmund Siau, a Singapore-based analyst at energy consultant FGE, told Bloomberg.
Thermal coal prices in Asia are also rallying, with Chinese prices surging due to tighter supply and industrial activity, according to Argus assessments.
Spot prices for liquefied natural gas (LNG) delivery in Asia jumped to a six-year high last month as lower-than-normal temperatures in key LNG importers and continued growth in China’s industrial activity boosted demand. Spot LNG prices for January delivery have jumped to over $12 per million British thermal units (mmBtu) as a cold snap in parts of the major LNG importers Japan, China, and South Korea raises demand for electricity and heating.
In Europe, the cold snap is also driving natural gas prices higher. Prices in Europe reached a two-year high earlier this week, and natural gas in storage is drawing down faster.
In the UK, prompt wholesale gas prices also jumped to their highest level in two years, according to Reuters estimates. The price surge is due to unusually cold weather at the start of the year, which pushes heating demand higher, as well as to low supply of LNG.
By Tsvetana Paraskova for Oilprice.com
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