Source: Bloomberg, Unigestion, as of 30.09.2021.
While many investors tend to focus on oil, the recent energy rally has been broader with the entire energy sector ripping higher. All sectors suffered at the peak of the Covid crisis last year but the rally that followed has dwarfed the initial pullback, taking many by surprise. This can clearly be seen in our chart, which compares the January-April 2020 correction versus the rally that followed.
Gas has attracted the most attention given the extreme price action, notably in Europe. The situation in the UK made the headlines as it went through a perfect storm of rising demand, declining stocks and a lack of external supply. The UK ranks as one of the lowest in Europe for natural gas storage capacity – less than 1% of Europe’s stored gas is held in the UK. Much of Europe therefore depends on external supply sources, notably from Russia.
The energy crisis we are currently experiencing in Europe is real and will not be solved overnight, as the supply response from an underinvested sector will take time to react.
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