Natural Gas

Natural Gas

BUY - rate is expected to increase, i.e. the first currency gains value against the second currency.
SELL - rate is expected to go down, i.e. the first currency is expected to lose value against the second currency.

Much like petroleum, natural gas – a rather similar commodity – is what one would call an “essential”. Among a number of industrial applications, natural gas is used for the heating of homes in several parts of the world. Without it, entire countries might find it impossible to make it through the winter.

It is a naturally occurring mixture of methane, various alkenes, nitrogen, helium and hydrogen sulfide. The composition of natural gas is obviously not uniform. Certain deposits yield higher grade gas than others.

Like petroleum, natural gas results from organic sediments buried under rock and subjected to intense pressure and temperatures over millions of years. It is therefore unsurprising that natural gas and oil are often found in close proximity.

The similarities between the two commodities do not stop there. The world’s reserves of natural gas are also concentrated within just a handful of countries. Of these, Russia is a major producer, possessing some 25% of the world’s known reserves. Iran and Qatar are also major producers of natural gas.

The US produces just enough of this valuable commodity to cover its own needs.

What drives the price of natural gas?

While it is indeed an “essential”, in some of its use cases natural gas competes with a number of other fuels.

The price levels of its competitors exert an influence over its own price levels.

– storage levels are also a major factor in the evolution of natural gas prices. Given that we are talking about a gas here (a highly flammable one at that) storage is by no means simple. Countries amass strategic reserves of natural gas, meant to tide them through periods of supply interruptions that may be caused by a variety of factors. Disasters, sabotage and geopolitical games all have to be factored in.

– economic growth leads to increased consumption of resources. With a booming economy, the mentioned strategic reserves can be exhausted quickly, in which case more gas needs to be acquired, more or less regardless of the cost.

– natural gas production levels also contribute to available supplies. When the supply is low and the demand high, prices naturally climb.

– import and export volumes have a direct impact on stored/available natural gas quantities too. Thus, they impact the price of the commodity as well.

– last, but certainly not least, weather is also a natural gas price-influencing factor. Short and mild winters mean reduced consumption and thus reduced demand. Lengthy, cold winters on the other hand make for steep gas prices.

Natural gas may not be the handiest fuel for vehicles, but it works great as such and it is actually more eco-friendly than gasoline.

In 2014, there were more than 20 million gas-powered vehicles in the world. The energy efficiency of such vehicles is equal to that of gasoline-powered cars. The efficiency of modern diesel engines is marginally better however.

Apparently, gas-powered planes are a feasible option as well, and several aircraft manufacturers world-over are developing such solutions.

BUY - rate is expected to increase, i.e. the first currency gains value against the second currency.
SELL - rate is expected to go down, i.e. the first currency is expected to lose value against the second currency.

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