Moneycontrol Pro Panorama | Energy crunch engulfs the globe

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The Panorama newsletter is sent to Moneycontrol Pro subscribers on market days. It offers easy access to stories published on Moneycontrol Pro and gives a little extra by setting out a context or an event or trend that investors should keep track of.

After crude and coal, the sharp rally in natural gas prices is adding to the global energy crisis. On October 6, global natural gas futures scaled a 13-year high. Supply and logistics issues in Europe and the US have pushed natural gas inventory to the lowest seen in at least the last five seasons, say traders.

Rising demand and short supply are familiar reasons why the price of a commodity goes up. But how did things come to such a pass?  Shishir Asthana argues in his piece today that things went from bad to worse as the gap in gas price in the US and Europe started expanding. The two large markets offered traders a tempting arbitrage opportunity which ultimately resulted in a short squeeze. The danger now is the difference between the gas prices at the two ends of the Atlantic threatens to introduce structural changes in the natural gas market, taking some players down before normalcy returns.

India is no exception to rising prices. Following the economic rebound from COVID-19, consumption is generally up. Last week, the government increased the administered prices for October 2021- March 2022 by 62 per cent over the April-September 2021 period, which saw the lowest prices since 2014, according to Reuters. Surely, such a sharp increase in prices will favour upstream companies. It is also bound to impact several industries that need natural gas. Do read our research team’s analysis on which sectors will feel the pinch.

Meanwhile, adding to the energy conundrum, the severe coal shortage has led to a deceleration in electricity production, globally and in India. But, public sector player NTPC Ltd stands out among utility companies for managing the situation better than private counterparts. This can be attributed to NTPC’s greater reliance on domestic coal, and better fuel linkages and payment terms with Coal India.

In any case, how these commodity prices behave will depend on several factors such as the transition to clean energy, production and demand across the world.

As commodity prices soar, equity markets too are rocking across the globe. Do read this FT article (exclusive for MC Pro subscribers) on how Larry Fink, the $10-trillion man, became king of Wall Street.

More investing insights from our research team

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IRCON and RVNL: A merger that can create value for all stakeholders

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Markets can be cruel: The key lesson from the Zee episode

Bajaj Auto’s KTM stake rejig signals EV strategy taking shape

Will crypto-currencies be Kryptonite for central banks?Technical Picks: Laurus Labs, TCS, SAIL and Cadila (These are published every trading day before markets open and can be read on the app)

Vatsala Kamat
Moneycontrol Pro