The value of oil is currently at its lowest in six years, leading to deflated natural gas prices for the UK.
Nearly half of Europe’s gas is sold under long-term contracts linked to crude oil; this combined with the pressure from rising LNG imports to the UK has led to a reduced demand.
“Unless we see some geopolitical event lead to supply disruption, then support for the wholesale gas market is likely to be limited” in the longer-term, Inspired Energy Risk Manager, Nick Cambell, told Bloomberg.
LNG flows and falling oil “point to healthy supply meeting somewhat lacklustre demand.”
Brent, the European benchmark crude, has plunged 54% in the past year on ICE. That will help lower gas prices in European utilities’ long-term supply contracts, “of which they have still yet to take up significant volume,” Campbell added.