* Oversupply has weighed down spot gas prices
* Politicians favour renewable energy, pay it over the odds
* This overshadows relations with gas suppliers, investments
By Vera Eckert
BERLIN, Nov 9 (Reuters) - European gas suppliers and retail distributors are bogged down by sustained oversupply in the market while government policy favours renewable power sources, both of which they say make investment in infrastructure risky.
Panellists at the 350-strong European Autumn Gas Conference (EAGC) said suppliers in the region, the world's largest importer, need to see a recovery in demand to take heart.
Stefan Judisch, chief executive of conference host RWE Supply & Trading, spoke of "extraordinary challenges" including weak consumption in the wake of the financial crisis and new gas resources are coming on stream in the United States. These are triggering falls in European spot gas prices and a widening of oil-gas price spreads.
The International Energy Agency said on Tuesday global gas supply is likely to exceed demand for another 10 years.
Meanwhile, European governments are subsidising increases in the supply of renewable energy to rival gas as a power source.
Germany is committed to supporting wind and solar power installations for the next 20 to 25 years to the tune of at least 160 billion euros ($222.6 billion), Judisch said.
"We (as a gas industry) are on a slippery slope of anti-market regulation," he said. "We are the derivative of the renewable market."
CHALLENGE FROM TRADING HUBS
For Domenico Dispenza, chief operating officer of ENI gas & power, the main challenge comes from the liquidity and low prices of Europe's new spot gas trading hubs.
These have decoupled spot from long-term prices, which he said annoys suppliers and weakens investor confidence.
"There is a level of confrontation between suppliers and marketers, showing how much pressure long-term supply contracts are under," he said.
European gas importers since last year have reneged on some long-term buying obligations with origin countries and ensured that parts of overall shipments are based on prices at spot gas hubs, which at times have been cheaper by as much as 50 percent.
This has squeezed margins for importers, who have been wedged between high stocks and oversupplied customers.
Europe competes mainly with Asian nations for long-term gas supply as its own resources shrink. It has to keep producers happy, and rock-bottom prices achieve the opposite.
But key elements of long-term pricing can probably be maintained and even reinstated once demand fully recovers, said Jean-Marie Dauger, executive vice president at GDF Suez, Europe's biggest gas buyer.
"We have signs of it (demand) restarting," he said, adding this would divert gas shipped on board tankers back to Asia, relieve European supply and bring greater convergence in oil and gas prices from 2013/2014.
UK consultancy Wood Mackenzie forecast Europe's current annual gas surplus of 65 bcm would balance out in 2015 and that it expected another 125 bcm supply gap by 2020.
(Reporting by Vera Eckert, editing by Jane Baird)