Throughout the world today natural gas prices continue to fluctuate due to significant characteristics. These characteristics are based on several factors, including the consumer’s location and the type of market that the consumer falls under. In the United States there are many transactions to be made in order for the buying and selling of this precious resource to take place, which result in the United States having a more efficient market system than many other countries. The pricing of this resource falls under two different types of market for the United States, and they are commonly called the physical market as well as the futures market.

Natural gas prices under the physical market are the prices that are paid for the confirmed and individual points of delivery throughout the United States. The pricing agreements under this market system are dependent upon the basis value of the location, as well as the final agreed price of delivery periods that are usually established at the start of a calendar month.

In the event of a contract expiring, the resource can be traded in the day ahead of the market, which prices are configured by examining the local supply and demand circumstances of every delivery location. The final transaction amount is created once the consumers have subtracted or added small amounts to the closest physical market price.

The futures market, or financial market of natural gas prices are based upon the standard contracts that have been developed by the New York Mercantile Exchange (NYMEX) market. This market type delivers 10,000 mmbtu\’s per day to Louisiana at the Henry Hub facility over the period of a month, which can vary in the amount of days each month has. The contracts that are developed under this market can expire before the starting day of a delivery month, which often results in traders either accepting physical delivery of natural gas, or making agreements with other market traders on the pricing.

The participation of both consumers and traders in this market remain active in transactions to benefit from the net cash flow of the contracts that are finalized among the various counterparts when a trading contract has reached its expiration date. This involvement of the counterparts is a way for them to exercise their financial abilities, as well as gain recognition to settlements in the physical market by simply allowing consumers to compare the costs of natural gas prices.

Although the market type is vital to pricing when it comes to this valuable resource, the basis of natural gas prices is what provides a foundation that is crucial for the development of contract agreements. In addition to the select markets, the characteristics of the location also plays an important role as well when it comes to the final and future price ranges of this natural resource. A location\’s storage, economic growth, export, competition, weather, and even demographics can all contribute to a price either decreasing or increasing in the final agreed settlement. The practices that are used in determining the cost are vital to keeping this resource affordable.

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Author Bio: For additional information on natural gas prices as well as how to switch electricity companies or finding a local
power company visit us online.

Category: Society
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