Global gas prices are at “extreme levels” due to low inventories and strong demand in Europe and China, and the market is set for a reasonably bullish five-year outlook, said Russell Hardy, chief executive officer of Vitol.

In a pre-recorded interview for the 2021 edition of the annual Platts APPEC conference, Hardy said global oil market has had a “pretty orderly” 2021 thanks in part to supply management by the global producers, but overall demand remained 4 million barrels per day behind the pre-COVID-19 levels of 2019, Reuters reports.

Extreme cold weather last winter thinned natural gas stocks in the West and inventories have failed to be rebuilt in time, resulting in record prices near $26 per million British thermal units (mmBtu).

“The low inventories have not been replenished in the way we like … the prices are at extreme levels that are way in excess of the cost for the supply chains to manage to manufacture fertilizer and other chemicals,” said Hardy.

Weather will be the single dominant factor driving demand and supply this winter, and the market is embracing for a few more months of volatility, he said.

Demand, however, has been less elastic especially from growth centers like China, where imports for both liquefied natural gas and pipeline gas have expanded strongly, he said.

While oil remains its dominant business, Vitol has pledged $1 billion in spending on green projects for the process of transition towards more environmentally friendly energy sources.

European reference gas prices have risen by more than 250% since January due to low stocks, high demand in Asia and disruptions, according to Agerpres. Rising energy prices have brought electricity costs in Europe to the highest level in years and the situation is unlikely to change by the end of the year, which means large bills for winter heating for consumers.