Gastech News asked Laurent Caldichoury, Deputy Director Trading at GDF SUEZ Trading for his views on the key drivers affecting Europe's gas pricing dynamics. Here is what he told us:
"The sharp drop in oil prices from July 2014 drove down oil-related gas prices, in Asia-Pacific mainly where indexation on oil remains the most significant (around 56%), and in Europe to a lesser extent (around 32% of oil indexation as a whole, falling to 12% if restricted to NWE). When the contractual link is weak or nonexistent, physical competition between oil products (mainly LPG) and natural gas still forced European gas prices to adapt downwards, as did the gradual closure of the arbitrage between Europe and Asia following the drop in Asian JKM prices.
As coal prices and US natural gas prices were more resilient, the energy complex recorded a greater price convergence.
Back in 2011, the outlook for gas looked promising, as developed in the “Golden Age of Gas" scenario of the IEA: gas would raise its share in primary energy demand, becoming number two ahead of coal. The sharp fall in coal and CO2 prices at the very moment the scenario was developed challenged this golden age and poses a double penalty risk for the gas market:
Yet, there are some open questions.
What are your views on Laurent's questions? Leave your comment below.
Laurent will also be speaking on a panel discussion on "Price convergence and the new realities of price formation" at the EAGC's Trader's Day on 17th November. To discuss more about Europe's gas market, join him and over 300 high-level gas industry executives at the EAGC taking place in Geneva. Follow the banner to know more:
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