Oil prices have touched their lowest value in six weeks, with both Brent and WTI being below the psychologically important $80 per barrel. Brent was quoted at $79.67/barrel in Friday’s intraday session, with WTI trading at $77.65 as talk of several countries releasing crude from their strategic reserves continued to gain momentum. The Biden administration has asked for the help of several countries. He has urged these counties to synchronize the release of crude oil from their Strategic Petroleum Reserves. He believes that this synchronized release will help to mitigate the global energy crisis.
Biden Concern over global energy crisis
While the Biden administration has reached out to several countries for help regarding the energy crisis, the European gas prices have rebounded from intra-week lows. This rebound happened after the Russian supply flow indicators remained disappointingly low. Last weekend, Gazprom began adding gas to its major storage sites in Germany and Austria, but Russia failed to reserve extra pipeline capacity, implying that any storage fill will come from existing flows.
On November 15, the price of UK National Balancing Point gas rose by near 1.89 pence per therm w/w to USD 204.79p/therm. This is a significant improvement above the settlement of 178.98p/therm on November 10th. The price of Dutch Title Transfer Facility gas increased by EUR 0.873 per megawatt-hour before jumping beyond EUR 89/Mwh on November 16 as the regulatory clearance procedure for the Nordstream 2 pipeline was temporarily halted.
Also, The COP26 summit, in particular the conclusion of the Paris Agreement’s carbon trading regime, has boosted the price of EUA carbon allowances. On November 15, the front-month EUA contract increased EUR 5.30/t w/w to an all-time high of EUR 65.93/t.
Energy shortage impacts on the US
President Biden has been pressed for action by members of the Democratic Party, notably Senate Majority Leader Chuck Schumer, who requested “prompt assistance at the gas pump” on November 14th. Gas prices in the United States have increased by 60% since the beginning of the year, with prices in California reaching all-time highs.
The White House’s major advisers, on the other hand, appear to be divided along the lines of their principal areas of competence. The president’s economic and political advisers, who are typically in favor of immediate action on gasoline prices, refer to declining presidential support ratings and alarming inflation readings.
The president’s energy advisers, who are generally more willing to wait, point to the EIA’s Short Term Energy Outlook’s gasoline price forecasts. The EIA expects gasoline to average USD 3.16 per gallon (gal) in December, down from the current national average of $3.41/gal, and between USD 2.99-3.02/gal in each of the first six months of 2022.
