European Heatwaves Boost Demand for Oil, IEA Says
August 11 2022 - 4:29AM
Dow Jones News
By Will Horner
Summer heatwaves in Europe and scarce supplies of pricey natural
gas are boosting demand for oil as power stations look for
alternative fuels to meet the surging demand for electricity, the
International Energy Agency said.
Unprecedented temperatures across the continent have put an
unexpected strain on the region's power grids, lifting demand for
electricity to power fans and air-conditioning units in what is
typically a quiet period for energy demand.
High prices and limited supplies of natural gas--after Russia
curtailed its energy exports to the region--are further pushing
power plants and heavy industries to look to oil as an alternative
fuel source, the Paris-based agency said in its monthly report
Thursday.
The additional oil demand comes just as tightness in the oil
market and soaring prices, which have helped fan the flames of
inflation, had been showing signs of easing.
The IEA said the trend would help drive additional oil-demand
growth totaling 380,000 barrels a day this year. It raised its 2022
oil-demand growth forecasts by that amount to 2.1 million barrels a
day.
The agency also raised its forecasts for total oil demand in
2022 and 2023 by 500,000 barrels a day apiece, to 99.7 million
barrels a day and 101.8 million barrels a day, respectively.
"A looming natural gas crunch in Europe is already incentivising
substantial gas-to-oil demand substitution," the IEA said, adding
that oil futures markets were signaling that the situation could
persist until at least the end of next year.
The additional demand counters expectations that flagging global
economic growth was reducing the global appetite for oil. Those
expectations, coupled with signs that oil production was steadily
creeping higher, have seen oil prices fall sharply from their
recent highs.
Brent crude, the international oil-price benchmark, has fallen
almost 10% in the last three months to around $97 a barrel, its
lowest level since Russia's invasion of Ukraine in February, which
sent oil prices soaring.
Those declines were making oil a comparatively cheap fuel source
compared to natural gas, prices of which have surged in Europe as
Russia has steadily reduced supplies through the Nord Stream
pipeline that links Russian gas fields with Germany.
European benchmark natural gas prices have risen almost 120% in
the last three months to 215 euros ($221.44) a megawatt hour, their
highest level since February.
Write to Will Horner at william.horner@wsj.com
(END) Dow Jones Newswires
August 11, 2022 04:14 ET (08:14 GMT)
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