Natural gas prices
Natural gas prices, as with other commodity prices, are mainly driven by supply and demand fundamentals. However, natural gas prices may also be linked to the price of crude oil and/or petroleum products, especially in continental Europe. Natural gas prices in the US had historically followed oil prices, but in recent years have decoupled from oil and are now trending somewhat with coal prices.
The current surge in unconventional oil and gas in the U.S. has resulted in lower gas prices in the U.S. This has led to discussions in Asian oil-linked gas markets to import gas based on the Henry Hub index (until very recently the most widely used reference for US natural gas prices).
Depending on the marketplace, the price of natural gas is expressed in US dollars (or other currency) per 1 million British thermal units (MMBtu), thousand cubic feet (Mcf), or 1,000 cubic meters. Note that, for natural gas price comparisons, $ per MMBtu multiplied by 1.025 = $ per Mcf of pipeline-quality gas, which is what is delivered to consumers. For rough comparisons, one million Btu is approximately equal to a thousand cubic feet of natural gas. Pipeline-quality gas has a BTU value slightly higher than that of pure methane, which has 1,012 BTU per cubic foot. Natural gas as it comes out of the ground is most often predominantly methane, but may have a wide range of BTU values, from much lower (due to dilution by non-hydrocarbon gasses) to much higher (due to the presence of ethane, propane, and heavier compounds) than standard pipeline-quality gas.
The natural gas market in the United States is split between the financial (futures) market, based on the NYMEX futures contract, and the physical market, the price paid for actual deliveries of natural gas and individual delivery points around the United States. Market mechanisms in Europe and other parts of the world are similar, but not as well developed or complex as in the United States.
The standardized NYMEX natural gas futures contract is for delivery of 10,000 mmBtu (10,000 million Btu) of energy (approximately 10,000,000 cubic feet (280,000 m3) of gas) at Henry Hub in Louisiana over a given delivery month consisting of a varying amount of days. As a coarse approximation, 1000 ft3 of natural gas ≈ 1 MMBtu ≈ 1 GJ. Monthly contracts expire 3–5 days in advance of the first day of the delivery month, at which points traders may either settle their positions financially with other traders in the market (if they have not done so already) or choose to "go physical" and accept delivery of physical natural gas (which is actually quite rare in the financial market).
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