Amid cold winter weather and fast-depleting inventories, Europe’s natural gas prices jumped on Monday to a two-year high to levels of over $100 per barrel oil equivalent, which now makes burning oil for industrial use more cost-effective.

Dutch TTF Natural Gas Futures, the benchmark for Europe’s gas trading, surged by 4% in Amsterdam on Monday, to the highest level since February 2023. The first proper winter in Europe with prolonged periods of cold snaps since the 2022 energy crisis is depleting the EU stockpiles of natural gas, which have dropped to the lowest level since the crisis for this time of the year.

As a result, European prices are rallying, and with most of Europe now relying on LNG imports for its natural gas supply, it has recently become more efficient for industries to burn oil and coal – wherever possible – as they are cheaper feedstocks than gas right now.

The gas-to-oil switch could boost oil demand in Europe, and also in Asia, in the first quarter, potentially giving more room and reason for OPEC+ to return more barrels to the market. The high natural gas price is a bullish tailwind for oil, Bjarne Schieldrop, Chief Analyst Commodities at SEB bank, said in a note on Monday.

Source: OILPRICE