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Natural gas prices in Europe and Asia have rocketed higher this week, thanks to the polar vortex pushing cold fronts into both regions, sending temperatures below freezing and stoking a burst in demand for power generation and heating.
A shift in wind patterns means the polar vortex – a pocket of frigid air that forms around the Arctic every year – moves further south than it ordinarily would, bringing cold fronts to the northern hemisphere.
This year, the cold front is forecast to move down from northern Russia, all the way through eastern Europe to the Mediterranean. The weather in parts of Europe has already been extreme, with the Spanish capital of Madrid paralyzed after the heaviest snowfall in 50 years this week.
“Frigid temperatures in Asia and Europe in the face of LNG supply issues have led to a surge in local gas prices,” Goldman Sachs said in a note on Wednesday.
“While data on emerging market oil-fired power generation and substitution capacity is limited, we believe this could lead to at least a 1 million barrel-per-day boost to global oil demand in coming weeks, with an upside potential of 1.5 million barrels per day,” the bank said.
Read more: Morgan Stanley says to buy these 26 economically sensitive stocks poised to outperform as oil prices spike 10% by year-end
“The Beast from the East,” as the phenomenon is known, last struck in Europe in late 2017 and into 2018. It has driven natural gas prices to record highs, while Dutch gas prices rose by as much as 40% at one point this week.
This time is no different. Following a rapid warming of the air above the Arctic, known as a sudden stratospheric warming (SSW), the polar vortex has pushed benchmark UK gas prices to around the highest since the start …read more
Source:: Business Insider