Similar to any market, the fine balance of supply and demand drives the movement of natural gas prices.
Studying the supply and demand curves, when the quantity demanded is equal to the quantity supplied, the market reaches its equilibrium price point. When the quantity demanded in the marketplace exceeds the quantity supplied, the price of the good increases as each unit becomes more valuable. The natural gas prices that we watch are a function of market supply and demand. Increases in demand generally lead to higher prices and increases in natural gas supply tend to result in lower prices.
So, what factors affect this supply and demand balance in natural gas markets?
Major supply-side factors include:
- Production levels
- Import and export volumes
- Storage injections or withdrawals
Major demand-side factors include:
- Weather variations
- Economic growth
- Alternative fuel choices
As we continue to unveil our educational series, we will give you a deeper glimpse into each of these factors!