Commodity / Natural Gas

Exploring the Natural Gas Market

A closer look into Henry Hub, Waha, Permian Basin, Haynesville, and more.

NATURAL GAS MARKET OVERVIEW

Natural gas is a crucial component of the energy market for its versatility, abundance, and relatively low environmental impact.

Natural gas is essential for electricity generation, heating, and industrial processes, offering a reliable and flexible energy source.

Additionally, it serves as a crucial feedstock for producing chemicals, fertilizers, and hydrogen, solidifying its key role in the energy sector and various industrial applications.

Sudden changes in natural gas prices affect industries like:

Energy and Utilities

Manufacturing

Transportation

Agriculture

Retail and Consumer Goods

Natural Gas Market Dynamics

Market factors include the supply and demand balance, such as export demand and storage levels, as well as weather conditions, particularly during key seasons like winter and summer.

WEATHER ANALYSIS

Weather has a heavy impact on natural gas prices primarily due to its influence on heating and cooling during key seasons.

Heating Demand

During cold weather, especially in winter, the demand for natural gas increases significantly for residential and commercial heating. Homes and businesses use natural gas for heating systems, leading to higher consumption. This surge in demand can push prices up, particularly in regions with harsh winters.

Cooling Demand

In hot weather, particularly in summer, the demand for electricity spikes due to increased use of air conditioning. Many power plants use natural gas as a fuel source for electricity generation. As a result, higher electricity demand leads to increased natural gas consumption, which can also drive up prices.

Storage Levels

Weather impacts storage levels of natural gas. During mild weather, less natural gas is used for heating or cooling, allowing more gas to be stored. Conversely, extreme weather can deplete storage levels more quickly. Storage levels are a critical indicator of future supply availability, influencing market prices.

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Supply and Demand Factors

While weather plays a significant role in influencing natural gas prices, various other supply and demand factors also critically shape the market dynamics. These factors identify the broader landscape of natural gas production, distribution, and consumption.

SUPPLY FACTORS • PRODUCTION LEVELS

Domestic Production

The amount of natural gas produced within a country affects supply. Advances in extraction technologies, such as hydraulic fracturing and horizontal drilling, have significantly increased production capacity.

Canadian Production

Production levels, especially from Canada also impact supply. Geopolitical events and economic conditions in this area may also influence production levels.

DEMAND FACTORS

Increased Exports

High international prices and large supply here in the U.S. have encouraged exports, allowing this factor to grow to be one of the largest sources of demand in a few years. Currently about 15-20% of Natural Gas demand.
See more information here.

Government Policies and Regulations

Subsidies and Incentives: Government policies that subsidize natural gas usage or provide incentives for its adoption in various sectors can boost demand.

Environmental Regulations: Policies aimed at reducing greenhouse gas emissions often favor natural gas over more carbon-intensive fuels, increasing its demand in power generation and industrial sectors.

Power Markets

As reliance on renewable energy sources becomes more commonplace, energy grids need on-demand power sources to fill in the gaps that occur. Natural Gas has been tapped for this task because it’s easily ramped up and sent immediately to the grid, when resources like solar and wind aren’t producing enough.

Regional Basis Markets

Henry Hub	Waha / Permian Basin	Appalachia
Bakken	Haynesville	Rockies

Henry Hub

Waha / Permian Basin

Appalachia

Bakken

Haynesville

Rockies

Future Trends & Innovations

Renewable Natural Gas (RNG)

Nearly identical to conventional natural gas, RNG is sourced from climate-friendly methane capture ranging from landfills, farms, food waste, and municipal solid waste (MSW). RNG is one of the lowest carbon-intensity fuels on the planet making it eligible for a host of lucrative state and federal credits.

WINTER STORM

Competitor’s Oil & Gas Customer Turns to AEGIS During Winter Storm Uri

AEGIS met with the producer and, through multiple meetings, focused on opportunities to maintain the flow of molecules and access premium pricing.

NATURAL GAS

Natural Gas Producer Controls Price Volatility through Hedging

This Natural Gas Producer hoped they could wait out the turbulent market without action, believing prices were likely as low as they would go...

PERMIAN PRODUCER

Permian Producer Recovers $650,000 Related to Incorrect Processing Fees

An error was quickly discovered in the settlement statements the producer was receiving related to processing fees.

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