7GAS pricing - Gas market is going through an unusual...

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GAS pricing For decades the long term relationship between oil and gas prices has been stable, apart from interruption in the short term by seasonal fluctuations, supply disruptions, weather and inventory changes. However there has been a widening gap between oil-indexed prices and gas-to-gas prices, due new factors such as economic downturn effect on the demand side, shale gas and new LNG capacity effect on the supply side. These factors are expected to remain for some years. Buyers in Europe are seeking renegotiations of their contracts in light of the new market forces. Some analysts however do not expect contract renegotiations to put an end to oil-indexed pricing in Europe. We would like to see the historical oil-indexed levels remain intact, meanwhile we are confidant that natural gas suppliers will overcome any short term challenges.
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Unformatted text preview: Gas market is going through an unusual period, drop in gas demand reached a record of 3% in 2010 after the global economic downturn, along with the unexpected boom in shale gas production in the US and the surge in LNG capacity. The economics downturn has changed prices dramatically and can change the behavior of market. The break in the historical link between natural gas prices and oil contracts has left gas prices at the lower side while oil prices are recovering. Although today’s gas market is rather uncertain, in the long run gas prices will be driven by demand, and if major exporters reduce production voluntarily or due to maintenance or other problems, prices might rise. The fundamental factors such as world economic growth, LNG developments, shale gas production capacity, and carbon policies will be the determining factors....
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