By FXEmpire.com

Introduction: Natural gas is nevertheless a major commodity in its own right, which is used for everything from cooking food to heating houses during the winter. Natural Gas is growing much faster than either of its non-renewable fossil fuel competitors, oil and coal.

Do not miss the weekly U.S. gas inventories report. The figures are issued by the Energy Information Administration (EIA) every Thursday afternoon at 15:30 (released Friday at 15:30 if there was a U.S. bank holiday on Monday). Here’s a link to the latest EIA report. The main natural gas moving figure in there is the change in inventories from the previous week. When it comes to the gas inventories report, we’re talking about billions of cubic feet, Bcf for short.

When the actual change in inventories number is released, it is the deviation from the expected number that is really important. If the actual inventories figure shows a 24 Bcf rise when an 84 Bcf increase was expected, then that is actually positive for the price of natural gas. All else equal, the price of natural gas should rise after the release.

A barrel of oil has roughly 6 times the energy content of natural gas. If the fuels were perfect substitutes, oil prices would tend to be about 6 times natural gas prices. However, due to various market characteristics discussed briefly above and the ease of using oil, the price of oil has been following a pattern of 8-12 times that of natural gas. However that ratio has spiked dramatically since March 2009.

Weekly Analysis and Recommendation:

Natural Gas continued to surprise investors all week, adding each day, to end the week at 2.6750

Throughout the week gas climbed on little supportive data, the EIA released a report showing that energy producers were switching some of the spare usage to gas, which could help increase the demand, but due to long term contracts with coal producers, the change was limited.

Another report was released showing that many producers were closing down wells or reducing production, which in time could affect the inventory, but at present inventory levels remain high based on this week’s EIA data and a reduction in production would not affect current supply demand levels.

Other than this, the weather forecast was for a warmer spring and early summer, if this materializes this could increase consumption, driving up prices.

None of this account for the overall rise in prices, we might see a shift of speculators moving from crude oil to gas, to see if they can manipulate the markets, as crude oil continues to fall, speculators need to go elsewhere.

There are many programs underway to develop shipping and exportation of natural gas, which will be huge boom to the industry but these are still a year or more in the future.

Historical:

High 5.13 January 2011

Low 1.903 April, 2012

Economic Events: (GMT)

WEEKLY

  • Natural Gas Weekly Update
    Release Schedule: Thursday between 2:00 and 2:30 p.m. (Eastern Time)
  • Weekly Natural Gas Storage Report
    Release Schedule: Thursday at 10:30 (Eastern Time) (schedule)

Originally posted here