http://www.vancouversun.com/business/Natural+finding+favour+markets/2080714/story.html
Summary:
This article talks about the natural gas prices going back up. One month ago, their value was at 40%, since then the prices went up to 60%, though still 30% below its crude-equivalent. The economic forecasts have been updated for 2010, helping the industrial production which in the end will lead to help of oil and natural gas. There has been talk about low production because of the wells being closed, but since winter is coming, it might change that. It is expected that the demand for natural gas will increase due to the lack of supply. Traders are betting that the supply/demand trend will lead to falling inventory levels.
Connection:
The connection between the article and chapter 2 is the supply and demand factors. The reason of the increase in demand for natural gas is because the lack of supply they have. The factor involving would be weather. The weather changiing to winter means the hurricane season is over and the cold weather is coming back again. This will create a increase in demand, however there has been many wells shut-off because of the low prices. It seems that there is low inventory expected, making the demands even higher. If we were to make a supply/demand curve, the demand curve would be shifted right and the supply curve would shifted left.
Reflection:
I think that we missed a great chance on investing into natural gas. From August on, the stocks for natural gas companies have been going up and nearing its peak. I think that the prices for natural gas will continue to rise because of the lack of supply. What I don't understand is that, why the supply is a problem. The wells that have been shut-off could easily be reopened, therefore, creating no problems at all. Finally, for those people investing in natural gas companies, they should have gained quite a lot by the new years.
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Supply and demand factor play an important role in determining natural gas price. Natural gas is the main natural resource that is used in home heating system. As winter approaches, demand for natural gas increase and thus its price goes higher. Moreover, since natural gas producers want to extend their profit margin, they choose to close up some of the well to restrict supply. A restriction in supply also stimulates the natural gas price to go higher. There are other factors that will affect natural gas price. For example, if scientists find a way to substitute oil with natural gas, the price of natural gas will definitely shoot up as natural gas is more efficient and environmentally friendly than oil. The price of natural gas reflects investors' sentiment of future resources.
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