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<TABLE border=0 cellSpacing=0 cellPadding=0 width=452><TBODY><TR><TD vAlign=top width=452 colSpan=2>Published April 26, 2010
</TD></TR><TR><TD vAlign=top width=452 colSpan=2>COMMODITY WATCH
</TD></TR><TR><TD vAlign=top width=452 colSpan=2>Low natural gas prices seen over next few months
By AVTAR SANDU
NATURAL gas is a major energy source for many countries - such as the United States, where it provides about 24 per cent of energy. The gas is used to generate electricity and to produce steel, glass and bricks. It is also used in homes for heating.
Natural gas is comparatively cheaper than alternatives such as crude oil and produces less carbon dioxide than coal or petroleum when it is burned, making it the preferred choice of environmentally conscious consumers.
There are two main elements to the price of natural gas - the cost of the gas itself and the distribution cost. Other factors influence the price trend: colder weather than normal, increased use for electricity generation, hurricane activity in the Gulf of Mexico and the price of crude oil.
As it is not easy to substitute natural gas consumption or production, changes in these factors often cause prices to fluctuate to remedy the supply-demand balance.
Natural gas as an investment instrument is traded on the New York Mercantile Exchange (Nymex) as a futures and options contract. The contract uses Henry Hub as its pricing point. Spot and futures prices set at Henry Hub are denominated in US$/mmbtu (millions of British thermal units).
Traders in natural gas pay attention to temperature fluctuations, especially in winter. Lower temperatures cause electric power plants to increase demand for natural gas to meet people's heating needs. Colder-than-normal weather contributed to higher gas prices in January and February this year, while warmer weather made for lower prices in March.
Traders also keep track of the level or volume of gas in storage facilities, most of which are underground. The amount in storage affects prices as it would dictate how sudden shifts in supply or demand can be accommodated. To avoid this, some large industrial consumers, such as power plants, switch from natural gas to oil or coal, causing a correlation in market prices.
Natural gas prices are expected to remain low for the next few months, with strong production and normal heating demand.
Near-term prices on Nymex futures are expected to range from US$3.50 to US$4.50 mmbtu given the expectation of a normal summer. However, if there are signs of El Nino-related weather patterns or hurricane activity, prices may rally.
The writer is Asian commodities manager
</TD></TR></TBODY></TABLE>
</TD></TR><TR><TD vAlign=top width=452 colSpan=2>COMMODITY WATCH
</TD></TR><TR><TD vAlign=top width=452 colSpan=2>Low natural gas prices seen over next few months
By AVTAR SANDU
NATURAL gas is a major energy source for many countries - such as the United States, where it provides about 24 per cent of energy. The gas is used to generate electricity and to produce steel, glass and bricks. It is also used in homes for heating.
Natural gas is comparatively cheaper than alternatives such as crude oil and produces less carbon dioxide than coal or petroleum when it is burned, making it the preferred choice of environmentally conscious consumers.
There are two main elements to the price of natural gas - the cost of the gas itself and the distribution cost. Other factors influence the price trend: colder weather than normal, increased use for electricity generation, hurricane activity in the Gulf of Mexico and the price of crude oil.
As it is not easy to substitute natural gas consumption or production, changes in these factors often cause prices to fluctuate to remedy the supply-demand balance.
Natural gas as an investment instrument is traded on the New York Mercantile Exchange (Nymex) as a futures and options contract. The contract uses Henry Hub as its pricing point. Spot and futures prices set at Henry Hub are denominated in US$/mmbtu (millions of British thermal units).
Traders in natural gas pay attention to temperature fluctuations, especially in winter. Lower temperatures cause electric power plants to increase demand for natural gas to meet people's heating needs. Colder-than-normal weather contributed to higher gas prices in January and February this year, while warmer weather made for lower prices in March.
Traders also keep track of the level or volume of gas in storage facilities, most of which are underground. The amount in storage affects prices as it would dictate how sudden shifts in supply or demand can be accommodated. To avoid this, some large industrial consumers, such as power plants, switch from natural gas to oil or coal, causing a correlation in market prices.
Natural gas prices are expected to remain low for the next few months, with strong production and normal heating demand.
Near-term prices on Nymex futures are expected to range from US$3.50 to US$4.50 mmbtu given the expectation of a normal summer. However, if there are signs of El Nino-related weather patterns or hurricane activity, prices may rally.
The writer is Asian commodities manager
</TD></TR></TBODY></TABLE>
