At the same time, this focus may further reduce investor appetite for fossil fuels and other carbon-intensive commodities years before global demand starts to taper off. Mining companies have, despite very strong earnings this year, seen their share price trail the broader market which highlights the difficulties for a sector that needs to prosper and grow at a time where investors and banks, for various reasons, no longer can or will support them.
Returning to short-term developments impacting the market, the first major hurricane to hit the U.S. this season was Ida which earlier in the week slammed into Louisiana, causing widespread flooding and power outages. The energy sector has been impacted with crude oil and natural gas production in the Gulf of Mexico being shut in and some refineries all forced to shut down, thereby disrupting the normal flows of oil and fuel products. At this point some 1.7 million barrels/day of crude oil has been shut in while nearly 2 million barrels/day of Gulf Coast refining capacity is estimated to be offline.
The natural gas sector which has already rallied strongly in recent months received an additional boost from the potential disruption to LNG export terminals on the Gulf coast. In Europe, the Dutch TTF benchmark reached a record €52.85/MWh or $18.5MMBtu. The same level was also reached in Asia where the Japan-Korea marker came close to the $19/MMBtu record from January. Tight global supplies caused by strong economic growth, hot weather, and in Europe reduced supplies from Russia, have all given the sector a major boost. The result being very high electricity bills, surging coal prices as a substitute and with that also rising cost of carbon emissions offsets.
With low stock levels of gas both in Europe and Russia, the prospect for a winter gas crunch remains a real threat with consumers and industry footing the bill. Some companies may even be forced to cut back production in order to curb demand.