U.S. oil and natural gas prices eased from multi-year highs Wednesday, but longer-term pressures in energy markets continue to rattle investors and stoke inflation concerns amid supply gluts and power switching within major global economies.
Energy prices have been surging in markets all around the world this fall, with natural gas in the U.K. hitting a fresh all-time peak, as China moves to secure fuel supplies for the coming winter while an unusually low season for wind power generation in Europe, coupled by the closure of coal and nuclear plants around the region, has added to prices pressures already exacerbated by a surge in post-pandemic demand.
Oil prices have rallied more than 50% this year, to the highest levels since 2014, as both the China and European energy crunch triggers fresh crude buying - a dynamic OPEC leaders have largely dismissed as the hold to previous plans that only include modest changes to the cartel's daily production targets.
"Low stockpiles of most fuels across the world, and limited time left to replenish stocks before the peak demand season, has left consumers around the world increasingly exposed to a supply crunch should we end up with a colder than normal winter, "said Saxo Bank's chief commodity strategist Ole Hansen.
"With gas and coal now trading at demand destructive levels, we are seeing the next stage of this energy crunch with production being curbed and Brent crude oil trading above $80 for the first time in three years on the prospect for increased substitution demand for oil-powered generation," he added.
Natural Gas futures for delivery on October 27, which traded at a 2008 high of $6.466 per million British thermal units (mmBtu) in the overnight session, fell the most since the beginning of the year to trade at $5.841 in early New York dealing.
EQT Corp. (EQT) - Get EQT Corporation Report, the country's biggest natural gas producer by volume last year, was marked 1.75% lower at $22.27 each while Chesapeake Energy (CHK) - Get Chesapeake Energy Corporation Report fell 1.9% to $63.87 and rival Devon Energy (DVN) - Get Devon Energy Corporation Report slipped 1% to change hands at $39.58 each.
In the UK, where the nation's power grid relies heavily on natural gas imports, prices surged by 37% on Wednesday alone to a fresh record high of more than $40 per British Thermal Units, a level that is around eight times higher than spot prices in the United States and the equivalent of around $220 for a barrel of crude oil.
"Low gas inventories across the globe as winter approaches have been pushing up demand in the physical market whilst supplies have been slower to respond," said ING's head of commodity strategy Warren Patterson. "Unplanned outages at some French nuclear power plants due to a strike has also helped the rally in European power prices yesterday and supported gas demand in the spot market."
In oil markets, WTI futures for November delivery traded 71 cents higher to start the session at $78.19 per barrel ahead of Energy Department stockpile data at 10:30 am Eastern time, while Brent contracts for December, the global pricing benchmark, were up 73 cents at $81.84 per barrel.
Exxon Mobil (XOM) - Get Exxon Mobil Corporation Report shares were down 1.12% at $60.93 each, trimming their six-month gain to 8.2%, while Chevron (CVX) - Get Chevron Corporation Report fell 1% to $104.85 each.
U.S. gasoline prices, meanwhile, hit $3.19 a gallon last week, according to data from the St. Louis Federal Reserve, the highest since October of 2014.