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U.S. natural gas prices have dropped for the first time in recent days after months of slump. Temperature breaks through USD/MMBtu This is a classic example of supply and demand fundamentals driving commodity prices higher.
First of all, it needs to be mentioned that although oil and gas are not separated, which is determined by their production mechanism, the driving factors of their markets are different. This is mainly reflected in the fact that crude oil itself is a global market transaction, while natural gas is a regional market. Chemical transactions also lead to different impacts on oil and gas-related products and companies themselves when facing price fluctuations in the market.
Since U.S. natural gas is a typical regional market-based transaction rather than a global market-based transaction, the factors that can directly affect its price fluctuations are often mainly concentrated on the relatively easy-to-grasp regional supply and demand fundamentals and the market formed around this fundamentals. The mood in the venue created by internal expectations. Although U.S. natural gas prices are also affected by speculative funds, their trading characteristics are that although they can be affected by expectations, once solid supply and demand fundamental change data appears, the price will still be closely linked to the supply and demand fundamentals over a certain time span.
Having said this, I have to mention that the price of natural gas in the United States has recently risen back to US$/million British thermal units after a lapse of a month, as shown in the figure below.
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From the picture above It can be seen that U.S. natural gas prices have increased by more than % since the beginning of this year. Generally speaking, the correlation between U.S. natural gas prices and the increase or decrease in U.S. natural gas inventories is much stronger than the correlation between crude oil prices and the increase or decrease in U.S. crude oil inventories
when the weather is not affected by overcooling or overheating. It is worth noting that the increase in U.S. natural gas inventories so far this month has reached the lowest value in the past few years (see the chart below). The chart above shows the comparative statistics of U.S. natural gas inventory growth from month to month over the past seven years. It can be clearly seen from the figure that the increase in U.S. natural gas inventories this year is almost the same as the lowest value in the past seven years. Industry insiders believe that this indicates that the fundamentals of natural gas supply and demand have changed significantly compared with last year, and it is this major change in fundamentals that has driven the increase in natural gas prices by more than % since the beginning of March. In addition, the main reason for this major change in fundamentals is that on the one hand, the continued low oil and gas prices have made it difficult for natural gas supply to maintain growth, and on the other hand, it is also affected by the surge in demand for natural gas power generation in the United States.
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