EXPERT INSIGHTS FROM BLACKROCK FUNDAMENTAL EQUITIES

Energy prices and equity implications

01-Nov-2021
  • Charles Lilford
  • Mark Hume
  • Nigel Bolton

Energy prices: higher for longer

Energy prices have surged over the past few weeks. Natural gas prices in Europe have gone past the highs experienced when the “Beast from the East” brought blizzards to the region in the winter of 2018 and 2019. Oil prices are following gas higher.

We expect energy prices in Europe to be higher for longer than consensus expectations, a view that is supported by the gas futures market. See the chart below.

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Watch the gas gap
UK gas prices, 2021-2025

UK gas prices, 2021-2025

Source: BlackRock Fundamental Equities and Bloomberg, October 2021. Note: Prices as of Oct. 6, 2021. Note the chart shows the UK National Balancing Point (NBP) price for gas futures (red) and the consensus forecast for UK gas prices. Consensus is the average forecast from Barclays; Bernstein; Citigroup; Goldman Sachs; HSBC; JP Morgan; RBC; SocGen; UBS; Wood Mackenzie. There is no guarantee that any forecasts made will come to pass.

Three investment takeaways

  1. Traditional energy may continue to win in the short term.
  2. Reach for renewables over the long term.
  3. Gas is critical to the transition.

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