How low oil prices are challenging natural gas markets

Low oil prices challenge natural gas markets through contractual indexation and fuel substitution. In the U.S., this threatens the economics of LNG exports and transportation demand. In Asia, it directly lowers prices due to oil-indexed contracts. In Europe, it may increase hub price volatility as the region absorbs diverted LNG volumes.

• Sustained oil prices between $50 and $60 per barrel are expected to reduce U.S. natural gas demand to approximately 740 bcm by 2020, falling short of the U.S. Energy Information Administration's 2014 projection of 770 bcm.
• The competitiveness of U.S. LNG exports to Asia is diminished by narrowing price spreads; if oil remains at $50-to-$60 per barrel, the spread between U.S. East Coast FOB costs and Asian import prices could collapse to between –$0.60 and $1.95 per MMBtu.
• Low oil prices are likely to cause delays or cancellations of U.S. LNG projects, particularly those lacking long-term buyer commitments or those relying on portfolio buyers. However, mature projects like Cheniere Energy’s Sabine Pass, the Freeport terminal, and the Cameron terminal are expected to proceed.
• U.S. natural gas demand from the transportation sector is projected to fall below 1 bcm by 2020 if oil prices stay at $50 to $60 per barrel, significantly lower than the EIA's estimate of 2 bcm.
• Low oil prices reduce the incentive for U.S. gas production from wet reservoirs because the break-even price for wet shale-gas development rises as the value of natural-gas liquids (NGLs) declines.
• Asian LNG import prices are expected to drop to approximately $7 per MMBtu by mid-2015 because long-term contracts are typically indexed to oil prices with a 6 to 12 month time lag.
• The European natural gas market has largely decoupled from oil, with hub-based indexation increasing from 30% in 2005 to nearly 80% by 2013.
• Europe may experience lower gas prices and increased hub volatility if LNG suppliers, such as Qatar, redirect volumes to Europe due to low prices in Asia.

APA

Martén, I., & Jiménez, D. (2015). How low oil prices are challenging natural gas markets. World Economic Forum. https://www.weforum.org/stories/energy-transition/how-low-oil-prices-are-challenging-natural-gas-markets/

Chicago

Martén, Iván, and Daniel Jiménez. How low oil prices are challenging natural gas markets. World Economic Forum, 2015. https://www.weforum.org/stories/energy-transition/how-low-oil-prices-are-challenging-natural-gas-markets/.

Wikipedia

{{cite report |last1=Martén |first1=Iván |last2=Jiménez |first2=Daniel |title=How low oil prices are challenging natural gas markets |publisher=World Economic Forum |date=4 May 2015 |url=https://www.weforum.org/stories/energy-transition/how-low-oil-prices-are-challenging-natural-gas-markets/ |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{martn2015how, author = {Martén, Iván and Jiménez, Daniel}, title = {{How low oil prices are challenging natural gas markets}}, institution = {World Economic Forum}, year = {2015}, month = may, url = {https://www.weforum.org/stories/energy-transition/how-low-oil-prices-are-challenging-natural-gas-markets/}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }