Economy

Natural gas price to remain low, despite crude oil rally

Our Bureau New Delhi | Updated on January 16, 2018 Published on December 06, 2016

natural-gas

IGU expects that the price of gas will eventually be ‘decoupled’ from the price of crude oil as gas-based markets evolve to enable an independent pricing.



Players in the natural gas market believe that gas prices are expected to remain subdued, despite a recent spike in crude oil prices.

This, according to them, is because of low demand and increased supply.

Speaking at the 5th IEF – IGU Ministerial Gas Forum held parallel to 12th Petrotech, International Gas Union President, David C Carroll said: “We have seen a dramatic increase in supply both with shale gas in North America and discoveries off the cost of East Africa, Eastern Mediterranean, and the engagement of players like Iran into the energy mix.”

Independent pricing

Caroll noted that there may be a subdued demand for the quantum of gas being produced from these new sources.

“In many respects, one might ask the question is there going to be sufficient demand in order to justify development of all these resources,” he said.

IGU also expects that the price of gas will eventually be ‘decoupled’ from the price of crude oil as gas-based markets evolve to enable an independent pricing.

Caroll said, “It’s clear that a majority of gas trade currently is linked to oil prices, but that percentage is decreasing. We are seeing a more democratisation of gas supplies going around the world and in those regions which are seeing trends of a decoupling between natural gas price and oil price in many respects.”

Buyers’ market

The natural gas economies are steadily shifting towards a dominantly buyers market. Caroll said, “Increasingly because there is more gas supply going into the market, more LNG availability from Australia, the US and South Korea, we are seeing great abundance and thus downward pressure on spot prices, which is giving buyers more flexibility and more options for their future supplies strategies.”

In his concluding remarks Minister of State (Independent Charge) for Petroleum and Natural Gas, Dharmendra Pradhan said that on one hand, the future of gas is bright, but, on the other hand, established policies and business models require closer consideration in the light of current energy market projections.

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Published on December 06, 2016
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