Understanding Natural Gas Prices

By Simone Malacrida

This manual explains the fundamental concepts for understanding natural gas prices
In particular, the following topics are covered:
what is natural gas, what are the reference markets and prices, what are the fundamentals of gas based on production, consumption, exports and stocks, what influences the price and insights into the financial instruments available. The obvious and obvious conclusion will be that natural gas is a very particular raw material with peculiarities not found elsewhere.

• Language: English
• Publisher: Simone Malacrida
• Release date: Sep 19, 2023
• ISBN: 9798223196457

Simone Malacrida

Simone Malacrida (1977) Ha lavorato nel settore della ricerca (ottica e nanotecnologie) e, in seguito, in quello industriale-impiantistico, in particolare nel Power, nell'Oil&Gas e nelle infrastrutture. E' interessato a problematiche finanziarie ed energetiche. Ha pubblicato un primo ciclo di 21 libri principali (10 divulgativi e didattici e 11 romanzi) + 91 manuali didattici derivati. Un secondo ciclo, sempre di 21 libri, è in corso di elaborazione e sviluppo.

Book preview

Understanding Natural Gas Prices

Simone Malacrida (1977)

Engineer and writer, he has dealt with research, finance, energy policies and industrial plants.

This manual explains the fundamental concepts for understanding natural gas prices

In particular, the following topics are covered:

what is natural gas, what are the reference markets and prices, what are the fundamentals of gas based on production, consumption, exports and stocks, what influences the price and insights into the financial instruments available. The obvious and obvious conclusion will be that natural gas is a very particular raw material with peculiarities not found elsewhere.

ANALYTICAL INDEX

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INTRODUCTION

CHAPTER 1 – GENERAL INFORMATION

CHAPTER 2 – NATURAL GAS TRADING

CHAPTER 3 – THE FUNDAMENTALS OF NATURAL GAS

CHAPTER 4 – AVAILABLE FINANCIAL INSTRUMENTS

CHAPTER 5 – FURTHER INSIGHTS

CONCLUSIONS

INTRODUCTION

In recent years, natural gas prices have hit the headlines even more than the raw material considered its big brother, oil.

Unfortunately, even in professional and high-level environments, lack of knowledge of the peculiarities of the natural gas market has led to bizarre, incorrect and imprecise statements resulting in sometimes tragic decisions.

Here, then, is the need for this writing.

To put the details and starting points in place.

The main topics covered below can be summarized as follows:

Definition, classification and uses of natural gas

Peculiarities of listed natural gas

Main financial instruments for trading on listed natural gas

Description of the fundamental parameters that influence the price of listed natural gas

Preliminary reading of the COT report

Elementary notions of meteorology relating to what happens in the United States

Elementary notions of percentage mathematics and leverage effect

This manual, and this must be clear from the outset, does not replace the necessary search for information and its constant updating, as well as the ability to analyze it and re-elaborate it by the individual.

It is rather to be considered as a starting point and a learning of a language for understanding the many mechanisms that govern the performance of this raw material, mechanisms so peculiar as to make natural gas an asset with very different behaviors compared to all other raw materials, even those that are apparently similar (such as oil).

The first and last belief that should permeate anyone approaching natural gas is the following.

Gas is gas and cannot be assimilated to anything else.

Why?

We will discover this over the course of the chapters, but this is fundamentally linked to:

Being a gas (and therefore bulky and difficult to store in confined spaces)

Have a production flow without huge inventories, working on only 1% of inventories compared to annual production

Being subjected to meteorological variability for a large part of consumption

Be a regional market and not a global one

Having volatility and variability beyond any imaginable limit

Anyone who is not aware of these factual truths cannot help but make a fatal error in judging the trend of natural gas prices.

CHAPTER 1 – GENERAL INFORMATION

The gas natural it is composed from one blend Of gas, mainly methane and, in measure minor, ethane, propane and butane.

Furthermore, It also contains impurities which anhydride carbon, oxygen, nitrogen and sulfide of hydrogen.

There is therefore no univocal chemical formula for natural gas, although almost everyone knows that methane has the following chemical formula: CH 4 , which is a molecule made up of one carbon atom and four hydrogen atoms.

Yes soles split out there typology Of gas natural in basic at different technologies Of extraction:

Gas conventional: And that That he comes extract normally is in areas desert is in areas Siberian.

Gas Arctic: And The gas That And possible to extract under the ice arctic and Alaska.

Gas submarine (deepwater): And The gas That Yes extracts come on backdrops oceanic, mainly In the Gulf Perch And in the ocean Atlantic.

Gas from shale (shale gas): And The gas That Yes extracts from details rocks (The shale) through a technique Of fracturing And drilling in surface or to depth Not high (technique of the fracking).

In reality, there is not just one type of natural gas, not even by probing within each of the different extraction technologies described above.

Natural gas is classified based on its calorific value (the higher it is, the better its quality) and based on the quantity of impurities (the fewer they are, the better the quality).

Broadly speaking, conventional gas is the best quality gas, while shale gas is the worst.

gas has the highest calorific value of approximately 42,000 KJ per cubic normal meter (volume of gas in normal thermodynamic conditions i.e. temperature at 0 °C and pressure at 1 atmosphere).

The cycle productive of the gas natural And, Of usual, divided in Three macro-sectors:

Upstream: And The sector That comprehends the procedures And the technologies For obtain The gas from underground.

Midstream: And The sector dedicated to the transport And at the storage of the gas from the site of extraction to that of refining.

Downstream: And The sector dedicated to the treatment of the gas For there distribution the final.

The gas it goes so extract, transported through gas pipelines or methane tankers come on places Of production to those Of consumption and treated For to be distributed. This And, in extreme synthesis, the supply chain of the gas natural.

It goes noticed That, to difference of the petrolium, The gas And compressible And Therefore the gas pipelines they have pressures Of exercise Very high (even 200 atmospheres). The gas he comes