The current shortage of natural gas and price spikes on the gas markets could be a boon to OPEC, which expects higher demand for other fuels when gas prices are at records for this time of the year in Europe and Asia.
Africa’s top oil producer and exporter, Nigeria, sees the soaring gas prices seeping into the oil prices because consumers would be forced to seek fuels alternative to natural gas this winter, Mele Kyari, managing director of the Nigerian National Petroleum Corporation (NNPC), told Bloomberg Television in an interview on Wednesday.
Demand for oil could be boosted by as much as 1 million barrels per day (bpd) due to the gas crisis, Kyari, adding that the gas crunch could push oil prices up by around $10 per barrel over the next three to six months.
Iraq, OPEC’s second-largest oil producer after Saudi Arabia, also believes that demand for crude will rise amid the shortage of gas, Iraqi Oil Minister Ihsan Abdul Jabbar Ismaael told Bloomberg.
Higher oil demand will be welcome news for OPEC as it looks to ease its cuts by 400,000 bpd each month until it unwinds all the collective cut at some point next year. Before the gas crisis hit Europe, analysts doubted that OPEC could stay the course of monthly additions to the market in view of the COVID resurgence in the past months.
Earlier this week, Goldman Sachs said that a colder winter and soaring natural gas prices globally could lead to higher-than-expected oil prices at the end of this year, with the potential for oil hitting $85 per barrel in the fourth quarter.
“The tightness in global gas supplies creates a clear and potentially meaningful bullish catalyst for the oil market this winter, larger than the downside risk to global oil demand from another Delta-like COVID wave,” the analysts at Goldman Sachs wrote in a note on Sunday.
Early on Wednesday, oil prices were up by more than 1%, with Brent Crude trading above $75.