Surging global gas prices make oil more economic fuel choice

Oil&Gas Materials 5 October 2021 10:24 (UTC +04:00)

BAKU, Azerbaijan, Oct.5

By Leman Zeynalova – Trend:

Skyrocketing global gas prices have made oil the more economic fuel choice for power generation and some refining and industrial applications, Trend reports with reference to the US JP Morgan Bank.

“With spot LNG prices legging even higher and now esceeding $30/MMBtu, we have significantly boosted our total estimates for additional oil demand from gas to oil switching over the upcoming winter months to 750 kbd,” said the Bank.

After reviewing the full potential for switching across industries and factoring in higher gas prices in the interim, the JP Morgan has concluded that its previous estimates for only a 200 kbd boost, predominantly limited to power generation switching in Asia, was too limited in both the magnitude of likely power generation switching alone and the scale for switching in other industrial applications including refining.

“Of our current 750 kbd boost from October through March, 550 kbd comes from boosted fuel oil demand in power generation. We still see the bulk majority of this coming in Asia, forecasting 250 kbd of additional demand in Japan, 170 kbd coming from other countries including Pakistan, Bangladesh, Indonesia, and Taiwan.

We also now see scale for an 80 kbd demand boost in Europe and 50 kbd from Brazil. The overall scale of potential additional oil demand from oil-fired power generation if all unused capacity turns on is immense, amounting to around 2 mbd globally. However, as we detail below, for a variety of reasons, we still think it is highly unlikely that all this capacity is fired up over the coming months,” said the Bank.


Follow the author on Twitter: @Lyaman_Zeyn