Russia warns global gas oversupply could trigger price "crisis"

SANTA CRUZ—At the Gas Exporting Countries Forum (GECF) in Bolivia, Russian energy minister Alexander Novak said that global gas supplies currently exceed demand, a situation that could lead to a "crisis" drop in prices similar to that which occurred in the crude oil market.

"The current excess supply of natural gas brings risks … of entering into the same crisis that affected oil prices," Novak said. Russia is the world's second-largest producer of natural gas, behind the US.

Gas prices have plunged more than 80% in the past decade and remain under pressure due to growing supplies of shale gas and increased availability of LNG.

Novak said the threats to global gas prices underscore the importance of long-term supply contracts, in which producers can be assured a stable price over the course of years instead of being subject to the ups and downs of the market.

The US has vastly increased its output of both crude oil and natural gas in recent years as improved drilling technology opened previously inaccessible reserves—a leading reason for a steep drop in petroleum prices.

The GECF, which includes members like Qatar, Iran, Russia and Venezuela, is modeled after the Organization of the Petroleum Exporting Countries (OPEC). OPEC's 12 member nations manage oil supply to control prices.

While the GECF has called for increased "cooperation" to defend its gas market, it has not applied production limits, as OPEC has done, to buoy crude prices.

(Reporting by Alexandra Alper; additional reporting by Monica Machicao; writing by Richard Valdmanis; editing by Chizu Nomiyama and Dan Grebler)

 

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