Analysis of the price of natural gas on the stock market

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On the energy commodities market, oil is of course the asset that is best known among the investors. However, just behind oil we find natural gas which is also a highly popular fuel commodity among investors on the stock markets. In fact, although oil is more often traded online, natural gas is gaining new market shares and drawing attention from individuals and professionals. But before taking position on its price it is of course necessary to complete pertinent analyses and we will now explain how to prepare and implement these analyses of the natural gas price online.  

Elements that can influence the price of this asset:

Analysis N°1

Global fuel demand which itself depends on the economic health of households and industry. Industrial growth and recession exercise a strong influence on the rise or fall of the price of gas.

Analysis N°2

The price of oil also strongly influences the price of natural gas. The higher the price of black gold so the higher the price of natural gas. Natural gas is also correlated with coal but to a lesser degree.

Analysis N°3

The value of the American Dollar as compared to other major currencies also influences the price of natural gas which is generally quoted in this currency. When the value of the dollar falls this often provokes a rise in the gas price.

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How is the quotation completed for the price of natural gas on the stock markets?

Firstly, before examining the different types of analyses that can assist you in correctly anticipating the future movements of the natural gas price online, we shall begin with an explanation on how this asset is quoted on the markets and how its price can change.

Firstly it is important to know that it is on the NYMEX or New York Mercantile Exchange as well as the IPE, or International Petroleum Exchange that natural gas is quoted on the stock markets. These two markets are both international.

It is of course possible to trade in the price of this commodity on smaller markets that are just active on a national level. However, these smaller markets are not generally available for trading on the lists of the online market brokers.

Concerning movements in the price of natural gas, changes clearly occur according to supply and demand as with the price of other fuel commodities such as crude oil. In fact there is a certain correlation that can often be observed between these two commodities.


Understand the factors that influence the price of natural gas:

To successfully complete your analyses of the natural gas price online it is primarily important to understand the factors that can exert a direct or indirect influence on the supply and demand of this energy commodity.

For example, and given that this price is quoted in American dollars, like crude oil, we know that  the price of natural gas is significantly influenced by the value of the U.S. dollar against other currencies. The commodities market is therefore not the only one to monitor and you should also follow movements in the Forex, or foreign exchange market.

Among the other factors that can exert a strong influence on the price of natural gas we can also note agreements and contracts signed between the various companies that specialise in the production or transport of this commodity. Here it is important to understand that these contracts are generally signed for time periods of between 5 and 25 years.

Of course, and as is the case for all the energy commodities, the price of natural gas is directly influenced and impacted by trading on the market. It is therefore extremely important to pay great attention to certain factors that will favour or disfavour this trading and also influence the volatility of this market.

Finally, concerning the factors that strongly influence the natural gas market we can also mention the price of oil and its movements. In fact, natural gas and crude oil are both energy or fuel commodities that could be said to be complementary as well as competitive commodities. In fact, we would note here that natural gas is often used as a substitute for oil in several of its uses. Therefore, when the price of oil rises significantly we can also often observe a rise in the price of natural gas as purchasers opt for a cheaper energy commodity.

The few factors that we have revealed here do not form a complete list of all influential elements, it is important that generally speaking you try and monitor all the events, publications and data that could influence a rise or fall in the supply or demand of natural gas on the markets.


How should you analyse the price of natural gas and monitor movements in its price?

We have just noted that certain exterior factors can influence the price of natural gas on the stock markets in varying degrees. However these factors, which are above all used when completing a fundamental analysis, are not the only ones that should be taken into consideration.  Apart from a fundamental analysis it is also necessary to complete another analysis, more statistical in nature, on the price of natural gas, and this is the technical analysis.

This analyse is above all based on a study of the historical and current stock market charts of this energy commodity. These charts are generally available from the trading platforms of the online brokers that offer trading in this asset but they can also be found elsewhere such as on specialised websites for example.  

The first thing to do here is of course to configure your charts correctly according to the trading strategy you wish to implement.  In fact, by personalising the display, notably that of the time units according to your trading strategy for each asset with short units for short term trading such as day trading and longer units for medium or long term strategies. The type of chart is also important and you can choose between lines, curves or Japanese candlesticks according to your strategy and the factors you wish to display.

Of course a technical analysis should not only take into account the current movements of the natural gas price but also its historical price being sure to compare the current configurations with the past configurations with the aim of trying to construct a model.

Finally, a technical analysis uses what are called technical or chart indicators. These indicators are actually factors that enable the calculation or estimation of the volatility, the strength, and the direction of a trend. Among the most common indicators that are used by traders in natural gas for their technical analysis we find the Fibonacci lines, the MACD indicator, the Bollinger Bands, the moving averages and the support and resistance levels as well as the pivot points.

These indicators can be calculated by the software integrated in the charts so they can therefore be displayed directly on them. Then you simply have to interpret their signals as precisely as possible and compare them to the signals obtained through the fundamental analysis that we have already covered previously.


Who is trading in Natural Gas online destined for?

Trading in natural gas is not an activity for everyone. It should in fact be remembered that this asset is particularly volatile and therefore represents a significant risk due to frequent and volatile reversals of its trends.

It is therefore essential, before starting to invest in this asset, that you are sure of mastering the different analytical methods of its price which we have covered in this article.

Bu this is not all! An excellent knowledge of this asset and its market is also primordial to understand its possible future price changes online. We therefore recommend that you study carefully all the characteristics of this commodity and the international trading in natural gas.

Finally, it is also necessary, depending on the investment method chosen, to apply good money management to limit the risks of losing part or all of your capital. Managing investment capital on the stock markets requires a certain experience and specific skills that can be acquired over time.

Frequently Asked Questions

On which markets is the price of natural gas quoted?

Natural gas is quoted on the so called ‘over the counter’ markets. Before, trading in this commodity was conducted through long term contracts, some of up to 30 years, between countries or national companies. However, natural gas is also traded on two major financial marketplaces. The price of this commodity is quoted on the NYMEX, or New York Mercantile Exchange, as well as the IPE, or International Petroleum Exchange in London.

What factors influence the price of natural gas?

Natural gas and its market price can be influenced by various different factors, notably the price of crude oil and that of other hydrocarbons in the same market it is indexed. But other factors can also influence the price such as geo-political factors as was the case with the Russian pipeline crisis, climate factors, global economic activities or even seasonal elements.

Should you buy or sell natural gas?

To know if you should take a buying or selling position on the price of natural gas you will first need to complete precise and comprehensive analyses of this asset price. You should therefore concentrate your attention on the fundamental factors that could lead to price movements and the technical stock market charts displaying movements you can observe.

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