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Falling oil prices will decrease gas prices

Falling oil prices across the world are expected to bring down global gas prices within 6 months, experts say

17.10.2014 - Update : 17.10.2014
Falling oil prices will decrease gas prices

By E. Gurkan Abay & Ata Ufuk Seker

ANKARA

Falling oil prices across the world are expected to bring down global gas prices within six months, experts said Friday.

Brent crude oil - the global benchmark for world oil index, has lost 28 percent in value since June and was traded at $85 per barrel on Friday.

Arif Akturk, Gas Group Leader of Petroleum Platform Association told Anadolu Agency that Turkey’s long term gas import contracts are indexed to crude oil prices. He added that decreasing oil prices will cause gas prices imported by Turkey's Petroleum Pipeline Cooperation, BOTAS, to also decrease.

Akturk underlined that the price of gas imported by the private sector in Turkey depends on the negotiations undertaken with the countries that the gas was imported from.

As of 2013, Turkey pays Azerbaijan $349 for every cubic meter of gas, and pays $429 to Russia for the same amount while Iran sells gas to Turkey for $507 per cubic meter. 

“Oil prices will likely begin to reflect a decrease in gas prices in four to six months,” said Benjamin Gage, associate director of IHS Energy Insight.

Gage said countries will continue to export liquefied natural gas, LNG, even if prices are lower, as exporters with long-term contracts with LNG buyers, such as Sonatrach with BOTAS, are contractually obliged to honor the volume of their contract. 

Gage in response to questioning on other impacts of the decrease of oil prices on global gas markets, said that a decrease in global economic activity will challenge the trade of LNG amongst its major fuel competitors - oil and coal. 

“LNG prices for the short-term, which are still a much smaller share of the global market compared to long-term contracts, are likely to retreat to lower price levels if a reduced oil price environment is sustained,” he added.

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