UK spot gas prices put pressure on production

摘要

A change in the UK gas supply-demand balance has caused the UK spot gas price and oil-indexed contract prices to delink, putting downward pressure on indigenous gas production. Since late 2008, the UK spot gas price has been significantly lower than oil-indexed contract prices. Although a large proportion of gas flowing to the UK is supplied under long-term contracts, significant volumes also are traded on the spot market. The delinkage between contract and spot gas prices has been prompted by oil price movements providing support to the former, while the latter has been weakened by oversupply and sluggish demand. The UK's oversupply position has been compounded by deliveries of LNG, with Europe, in general, offering more attractive returns to suppliers than other Atlantic basin markets.