Another Commodity

   

Another Commodity



Let's look at another commodity the market for which was strongly affected in the last year - natural gas. Similar pattern as with oil, the clear increase over the last year and then some eventual decrease of the natural gas prices, the forces of market worked.

It has to be looked a bit differently as it had bigger effect in some regions of the world than the others. Europe probably being the most affected where they had to rearrange all supply channels. But here we look at the prices quoted on futures in US market which is not directly affected, only as much as global market reacts.

And the same comment for it as a component of recent inflation. The price on the global scale without looking at regional changes went back practically to previous. And this illustrates again the stickiness of prices that tend to go up when there is an incentive to do so but they don't tend to go back.

An occasion as well to learn or to refresh knowledge on different measuring units:

  • MMBTU stands for Million Metric British Thermal Units. This is a unit for heat content equal to 1,000,000 BTU.
  • The British thermal unit (BTU or Btu) is a measure of heat, which is measured in units of energy. It is defined as the amount of heat required to raise the temperature of one pound of water by one degree Fahrenheit.
  • m3 or Cubic Meter is a basic unit for the volume of natural gas. The volume of natural gas (expressed in m3) will determine the MMBTU output, and visa versa.
  • To convert, 1 m3 of natural gas is equal to 0.0366 MMBTU.
  • To convert, 1 MMBTU is equal to 27.3192 m3.



With the structural changes in the market it is interesting to see the liquified natural gas (LNG) development. Taking Japan/Korea market which is mainly dependent on imports and have not had any important changes the pattern also remains similar. It would seem that commodities markets have adjusted to changed situation and the prices came back to previous levels. This remains to be confirmed with further development as for the moment previous levels only cover several latest months.








 

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