Contracted Gas Volume as Factor of Price Formation on Natural Gas Markets

35
DOI: 10.20542/0131-2227-2020-64-5-84-92
Gazprom export LLC, Litera “A”, 2a, Ostrovskogo Sq., St. Petersburg, 191023, Russian Federation;
D. Chapaikin (dchapaykin@gmail.com),
Gazprom export LLC, Litera “A”, 2a, Ostrovskogo Sq., St. Petersburg, 191023, Russian Federation


Abstract

Long-term contracts (LTCs) are the hallmarks of the European and Asian gas markets. The dominance of LTCs in international trade leads to their “gravity-center” function in relation to spot prices. When regional gas market is tight, spot prices reside above the LTCs prices. When market is loose they reside below the LTCs prices, but in any case LTCs’ prices serve as anchor for spot gas prices. Taking into account that all market imbalances are concentrated in the spot or non-contracted segment of the market, its prices are overreacting to even insignificant market imbalances. Size of the uncontracted segment thus plays an important role in price formation for natural gas as it becomes a self-sufficient factor determining the volume of demand. Overcontracting, which artificially downscales the size of demand in the uncontracted market segment, often causes a negative spread between spot and contracts price. The paper examines the role of this factor in price formation by measuring correlation between the size of the uncontracted segment and spot price formation. Concerning Europe, the research showed a nearly linear relationship between the LTCs to imports index for pipeline gas and spot/contract price spreads. Such a relationship allows to build up a regression model for forecasting the spot prices. In Asia, ovecontracting leads to high volatility of spot prices. Their dependence on the size of uncontracted segment fully reveals itself in the periods of seasonal picks of demand for natural gas.


Keywords

contracted market segment, non-contracted market segment, anchor prices, spot and contract pricing patterns, contract to pricing index, correlation analysis, regression model, international aggregators


REFERENCES 

1. Shell LNG Outlook, 2019 edition. Available at: https://www.shell.com/energy-and-innovation/natural-gas/liquefied-natural-gas-lng/lng-outlook-2019.html (accessed 23.06.2019).

2. European Gas Short-Term Price Outlook. IHS Waterborne, May 2019. Available at: https://ihsmarkit.com/products/euenergy-forecasts-strategic-analysis-insights-by-fuel.html (accessed 23.06.2019).

3. European Gas Long-Term Price Outlook. IHS Waterborne, May 2019. Available at: https://ihsmarkit.com/products/globalgas-supply-demand-pricing-outlooks.html (accessed 23.06.2019).

4. European LNG Spot Market Share. IHS Waterborne, 2019. Available at: https://ihsmarkit.com/products/global-gas.html (accessed 23.06.2019).

5. IHS Markit LNG and Gas Prices. IHS Waterborne, June 2019. Available at: https://ihsmarkit.com/products/global-gassupply-demand-pricing-outlooks.html (accessed 23.06.2019).

6. Natural Gas Prices, Markets and Analysis. ICIS Heren, 2019. Available at: https://www.icis.com/explore/commodities/energy/gas/ (accessed 23.06.2019).

7. Platts Market Data – Natural Gas. S&P Global Platts, 2019. Available at: https://www.spglobal.com/platts/en/products-services/natural-gas/market-data-natural-gas (accessed 23.06.2019).


Registered in system SCIENCE INDEX

For citation:
Komlev S., Chapaikin D. Contracted Gas Volume as Factor of Price Formation on Natural Gas Markets. Mirovaya ekonomika i mezhdunarodnye otnosheniya, 2020, vol. 64, No 5, pp. 84-92. https://doi.org/10.20542/0131-2227-2020-64-5-84-92



Comments (0)

No comments

Add comment







Indexed
 
Current Issue
2021, vol. 65, No. 4

Topical Themes of the Issue:

  •  Coronacrisis in the EU: a Knock-Down or a Jump-Off for Integration? 
  •  Latin America in the South-South Cooperation Against the Background of Globalization Controversies 
  •  Reforming the Saudi Economy: Results and Perspectives 
  •  Non-Western Theories of Development in the Global Capitalism Era
  •  About an Attempt to Create a Theory of International Relations in IMEMO in the 1970s
View This Issue (2021, vol. 65, No. 4)
Submit an Article
Announcement

Dear readers!
Please note that free access to full-text issues of the Journal is being opened at our WEB-site after 6 months of the date of publications.The work on deepening the open archive of full-text issues will be continued.


Dear colleagues, authors and readers!
We kindly request you to turn to editor-in-chief and executive secretary directly concerning reviewing scientific publications in our journal. Only editor-in-chief takes decision on order and publication the reviews!

Dear readers!
This is to inform the researchers of the Institute of World Economy and International Relations that electronic versions of the IV issue of 2020 and I issue of 2021 of French magazine Politique étrangère are now available. Those who are interested, please personally address to the editorial staff of MEMO Journal (room 18-17) with an electronic media.
NEW SECTION

In response to the challenges of our time the Editorial board continues to open new thematic rubrics:

“World Energy Sector after Pandemic”. We plan to publish articles presenting in-depth analysis of influence of Pandemic on the global energy sector and forecasts of further developments in its various branches.

“Civilization processes of modern development” is a new rubric opened by MEMO Journal in 2020. It will be devoted to the analysis of the influence of civilizational factors and inter-civilizational interactions on the political and socio-economic development of the world at whole, regions and countries.

“Africa today and tomorrow”The rubric devoted to contemporary issues of Africa which is attracting growing interest of the world's leading actors. We plan to publish the articles analyzing the status of statehood, socio-economic and political development of the countries of Black continent, as well as the integration processes between them.

CONTEST!

"World Eсonomy and International Relations" announces a contest for the best joint academic publications of domestic and foreign researchers and experts in topical issues of the world economy and international relations. The winners will be selected according to the results of peer reviewing and discussion at the Editorial Board. The articles will be published in priority order.

SUBSCRIBE TO THE JOURNAL

The print version of “World Economy and International Relations” journal is distributed by advance subscription only, and is not offered for retail sale. To subscribe please address to any post office in Russia by referring to the Federal Postal Service Union Catalogue, section “ARSMI”, the journal index is 70542. The subscription may be made for the whole subscription period or starting from any nearest available month for desired number of issues.

To purchase the full-text electronic version of the journal’s issue/article please address to the WEB portal of Scientific electronic library eLIBRARY.ru or URL: https://press.gaugn.ru/.

In journal
Years
2021 | 2020 | 2019 | 2018 | 2017 | 2016 | 2015 | 2014 | 2013 | 2012 | 2011 | 2010 | 2009 | 2008 | 2007 | 2006 | 2005 | 2004 | 2003 | 2002 | 2001 | 2000 | 1999 | 1998 | 1997 |

The author’s opinions may not coincide with the position of editorial