Energy shortage triggered economic recovery concerns, U.S. oil trading fluctuated and closed above US$80

On Tuesday (October 12) U.S. oil futures rose by US$0.12, or 0.15%, and settled at US$80.64/barrel; Bulk Oil fell by US$0.23, or 0.27%, to US$83.42/barrel, which was as high as US$84.23 during the intraday session. , As low as US$82.72. The shortage of natural gas and coal during the winter in the northern hemisphere has prompted some people in the power industry to switch to fuels such as diesel and fuel oil. Investors are assessing how the global power crisis will affect oil demand this winter, and the intraday trend is turbulent.

On Tuesday, the authorities of two major energy-consuming countries in Asia rushed to fill the growing power supply gap, hitting global stocks and bond markets, fearing that rising energy costs would intensify inflation. Europe is suffering from the pressure of soaring natural gas. CIBC Private Wealth Management senior energy trader Rebecca Babin said that when the price of natural gas in Europe reaches a price equivalent to $250 per barrel of crude oil, it is difficult for us to predict what will happen.

James Whistler, SSY's global head of energy derivatives in Singapore, said that the crude oil market has been involved in a widespread rebound in the entire energy industry. High natural gas and coal prices have boosted the prospect of electricity companies turning to rely more on oil for power generation. Driven by energy shortages in Asia, Europe and the United States, electricity prices have risen to record levels in recent weeks. Analysts estimate that gas-to-oil conversion in the power generation industry may increase global crude oil demand by 250,000 to 750,000 barrels per day. Saudi Aramco estimates that the natural gas shortage has increased oil demand by about 500,000 barrels per day, and Citigroup estimates that it may reach 1 million barrels per day.

At the same time, the International Monetary Fund (IMF) on Tuesday lowered the growth prospects of the United States and other major industrialized countries, and said that continued supply chain disruptions and price pressures hindered the recovery of the global economy from the new crown epidemic. The IMF's "World Economic Outlook" lowered the global growth rate forecast for 2021 from 6.0% in July to 5.9%, and maintained the growth rate forecast for 2022 at 4.9%.

Price Futures Group analyst Phil Flynn said that people are beginning to realize that the risk of rising energy prices may derail economic growth. Is the demand for energy a good thing or a bad thing?

Analysis of crude oil futures spreads and time skew (skew) shows that as traders reflect expectations of falling inventories, the bullish outlook for oil prices has strengthened. The premium of WTI futures in recent months to the next delivery month contract is testing the high level three years ago, highlighting the tight supply in the market. This phenomenon occurred in October, and this month's price difference is usually narrowed by seasonal increases in inventory in the warehouse center Cushing, Oklahoma. In percentage terms, this premium was the largest since 2011. At that time, there was a traffic bottleneck near Cushing, and WTI rose by more than 17% that month.

Last week, the spread between put and call options, also known as skew, fell below zero for the first time since 2019. The skewed downside shows that oil traders are more willing to pay for price insurance for big increases rather than big drops. There is a negative correlation between skewness and oil prices, with a daily average of 0.3 in the 120 days ending on Monday.

(4 hours chart of US Oil)