Correlation between gas prices and oil product prices

  • xls
  • pdf

Description

This graph shows the evolution of prices for long-term natural gas supply contracts in Europe (BAFA: import price in Germany), the market price for natural gas on the London stock exchange (NBP Spot) and the price of oil products represented by the Brent index (€/barrel).


Analysis

This indicator underlines the strong correlation between the prices of natural gas and oil products. The prices of long-term natural gas supply contracts are indexed to the Brent price. The three to six month discrepancy in the long-term contract prices as compared to the Brent price is due to the smoothing of the indexing formulas. After 3 years of relative stability (between 80 and 90 €/bl), the Brent index dropped drastically: it was halved between June 2014 and January 2015. The weak recovery in Brent prices in early 2016 was reflected in spot gas prices in the second half of 2016. After a drop in Brent crude oil prices in the first quarter of 2017, the latter has been rising again since the second half of 2017. This is also observed on the spot price of gas.

 

Source SOeS, World Data Bank (2018)