By Rob Verdonck, Bloomberg Markets Live reporter and analyst
Crude will likely rally into the year end as Europe’s energy crisis outweighs news on supply.
Oil prices have slumped on signs of a deepening global slowdown as more supply from Libya and, potentially, Iran ease the market’s fundamental tightness -- but traders may still be underestimating the full ramifications of Europe’s energy crisis.
I have been stunned by the relentless surge in European natural gas, a market I’ve been following closely for almost two decades, and can’t imagine that prices there soaring to almost $375 a barrel of oil equivalent won’t have knock-on effects.
It’s hard to gauge the full ramifications on oil but the rally that has seen European gas surge 160% over the past two months, in what is usually a quiet time of low demand, doesn’t look like it’s ending anytime soon and may see a last hurrah for the region’s aging oil-fired plants.
Add that extra demand to the start of Europe’s ban on Russian crude later this year and the energy crisis is almost certain to warm up crude trading going into winter.