Natural gas

Oil VS natural gas prices comparison

The oil markets have seen significant price falls in the last 12 months, due primarily to a massive supply glut. Natural gas costs, which have traditionally already been in conjunction with oil, have actually used the trend downward. Can people rely on gas costs to always follow crude oil? While propane and oil have actually historically moved together, both products can and do diverge oftentimes. In this article, we're going to analyze different elements affecting oil and natural gas rates.

Dimension in manufacturing

The first fundamental distinction we shall evaluate is the products of measurement of manufacturing: oil is calculated in drums and gas is assessed in units of 1000 cubic legs called Mcf (the M originates from the old Romans page of M, which designed 1000). The most frequent method to transform those two is the drums of oil equivalent (BOE). Here, 1 BOE is equivalent to 6, 040 cubic foot of fuel, or essentially 1 BOE is equivalent to 6 Mcf.

Cost Correlation

Our conversation today moves us towards the price correlation between oil and natural gas following crude oil and gas prices. If crude oil prices progress, will propane prices follow? Below is a chart showing oil and gas price correlations between 2003 and 2014. The typical correlation had been 26.53%. (To get more see Do Oil and Natural Gas Rise and Fall Together?)

As you can plainly see when you look at the chart above, crude oil and propane costs sometimes moved together and often relocated in other instructions. Furthermore, notice how there have been in addition broad variants in just how closely they correlated with each other. One explanation the difference is oil is a worldwide commodity while natural gas is a far more regional product. Therefore, gas is affected by regional conditions and seasonality.

International Influence vs. Local Effect

Another key difference to understand when buying oil versus natural gas may be the primary facets that influence their particular rates. The price tag on oil is impacted by numerous geopolitical and financial aspects. The U.S. Energy Information department published a written report listing seven factors that affect oil markets, including alterations in production in Saudi Arabia, sudden offer disruptions, alterations in non-OPEC supply and changes in production levels.

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