News / Business
Natural Gas Prices Move Opposite of Crude Oil
Crude oil prices on the New York Mercantile Exchange (NYMEX) continue to climb higher. Breaching $75 per barrel, the price rebound could actually hinder an economic recovery.
The value of the U.S. Dollar has fallen to its lowest level of 2009 and its lowest level since September 2008. When the value of the U.S. Dollar is weak relative to other currencies as is the case today, investors flee the U.S. Dollar in search of other investments, namely crude oil and gold, as a way to hedge against inflation.
“The price strength in crude oil is entirely about the U.S. Dollar, not rebounding demand,” says Valerie Wood, President of Energy Solutions, Inc. “Because crude oil is used in so many products, if the price continues to move upward, it could actually slow an economic recovery. There is plenty of supply, but right now, that isn’t playing into the price of crude oil.”
Just as the value of the U.S. dollar has dipped to its lowest level since September 2008, the front-month crude oil NYMEX price is now trading at around $75 per barrel, its highest level since September 2008. “The U.S. Dollar and crude oil have an inverse relationship,” says Wood. “The only way crude oil prices are going to decline is if the U.S. Dollar gains in value against other currencies and in order for that to happen, the government is going to have make some decisions about its current monetary policies.”
Meanwhile, natural gas prices are marching to the beat of a different drum. “Because natural gas isn’t as closely tied to the U.S. dollar, it is truly trading on fundamentals of supply and demand and is declining while crude oil prices rise,” says Wood.
Learn more about the direction of crude oil and natural gas prices in the October edition of The Advisor. Request your complimentary copy by sending your request to request-oct-pr15@energysolutionsinc.com or call (608) 848-9859.
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About Energy Solutions, Inc.
Formed in 1996, Energy Solutions, Inc. is independently owned. With more than 25 years of experience in the natural gas industry, our team focuses on natural gas prices and in helping businesses improve their internal processes for the purchase of natural gas.
