Learn About Futures Insider For November 10 : Natural Gas (Part 3)

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Part 2 : Learn About Futures Insider For November 10, 2011: Natural Gas (Part 2)

Key Uses

Natural gas can be used for gas turbines and steam turbines in electricity generation. Supplied to homes, it is used in appliances and central heating. Compressed natural gas may also be used for automobile fuel. The overall usage distribution may be illustrated as follows:



**Data courtesy of EIA

Key Concerns

As with crude oil, weekly statistics released by the EIA can bring a fair amount of price volatility to natural gas markets. In addition to the weekly reports, the following items can also bring price fluctuations and are events and information worth noting:

Supply and Demand – The level of natural gas supply relative to overall demand can fluctuate and affect prices. Possible seasonal demand and competition on a retail level can also exert pressure on supplies particularly during colder winter months when usage for heating increases. Any event which threatens the supply or refining output - such as weather disruptions (like hurricanes) or pipeline issues - may affect prices.

Geopolitical Tensions – Pipeline or politically motivated supply disruptions from major suppliers like Russia may impact prices, and tensions in the Middle East can also bring price volatility.

Environmental Issues – The drive for cleaner burning fuels may change the supply and demand dynamic of natural gas since it may release fewer sulfur, carbon, and nitrogen emissions than other fossil fuels. It does, however, release carbon dioxide which many people believe may change the global climate.

Available Reserves – Although producers are now working at gathering natural gas from challenging or innovative sources like shale, the same concerns of finite supply which plagues crude oil affects natural gas. The following chart illustrates proved reserves in global regions:



**Data courtesy of EIA

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