Commodities: Natural Gas

Consisting mostly of methane, natural gas is found alongside coal beds and other fossil fuel deposits throughout the world. It’s used extensively throughout the U.S. to heat homes and generate electricity and has important applications in both commercial and industrial settings. Within the U.S., five states – Texas, California, Louisiana, New York and Florida – account for about 39% of consumption.  

Contract Specifications

Production        

Almost 80% of the world’s total proven natural gas reserves are found in 10 countries: Russia has the most, with about 25% of total reserves, followed by Iran and Qatar in the Middle East. Other top countries include Turkmenistan, the U.S., Saudi Arabia and the United Arab Emirates. The U.S. produces nearly all of the natural gas that it uses, and five states account for nearly two-thirds of total U.S. dry natural gas production: Texas, Pennsylvania, Oklahoma, Wyoming and Louisiana.

Price Drivers

Small changes in supply or demand can result in substantial price movements that ultimately bring supply and demand back into balance. Factors that affect supply and demand, and therefore price, include:

• variations in natural gas production
• the volume of imports and exports
• storage levels
• economic growth
• variations in winter and summer weather
• prices of competing fuels