Markets Home

Active trader

Hear from active traders about their experience adding CME Group futures and options on futures to their portfolio.

Find a broker

Search our directory for a broker that fits your needs.

CREATE A CMEGROUP.COM ACCOUNT:

MORE FEATURES, MORE INSIGHTS

Get quick access to tools and premium content, or customize a portfolio and set alerts to follow the market.
Market Data Home

Real-time market data

Stream live futures and options market data directly from CME Group.

E-quotes application

Access real-time data, charts, analytics and news from anywhere at anytime.

CME DATAMINE:

THE SOURCE FOR HISTORICAL DATA

Explore historical market data straight from the source to help refine your trading strategies.
Services Home

Uncleared margin rules

Understand how CME Group can help you navigate new initial margin regulatory and reporting requirements.

Calculate margin 

Evaluate your cleared margin requirements using our interactive margin calculator.
Education Home

Now live: ESG solutions

Manage the risk associated with renewable energies, environmental change and sustainable investments.

Create a CMEGroup.com Account: More features, more insights

Get quick access to premium educational content, including expert-led webinars, a real-time trading simulator, and more.
      Course Overview

      Introduction to Natural Gas

      • Natural Gas Overview
      • Natural Gas product overview
      • Understanding Henry Hub
      • Understanding Supply and Demand: Natural Gas
      • Introduction to Natural Gas Seasonality
      • Understanding Natural Gas Risk Management Spreads & Storage
      • Natural Gas Calendar Spread Options
      • GUlf Coast LNG Export futures product Overview

      Introduction to Crude Oil

      • Discover WTI: A Global Benchmark
      • WTI product overview
      • Understanding Crude Oil in the United States
      • The Importance of Cushing, Oklahoma
      • Crude Oil Auction
      • WTI Houston Futures (HCL) Dock Allocation
      • Introduction to European Crude Oil
      • Brent Crude Product Overview
      • Learn about Crude Oil Across Asia Region
      • Understanding Commodity Storage
      • Crude Oil: Futures versus ETFs

      Introduction to Power

      • Understanding Basics of the Power Market    
      • Energy Market and Risk Management with Options
      • Managing Risk in the Capacity Market

      Introduction to Refined Products

      • A Look into the Refining Process
      • RBOB Product Overview
      • Heat Oil Product Overview
      • Learn about the 1:1 Crack Spread
      Introduction to Energy
      You completed this course.Get Completion Certificate

      Understanding Supply and Demand: Natural Gas

      Also available in  |  |  | 

      Video not supported!

      Understanding Supply and Demand: Natural Gas

      Natural gas production in the United States has been rising steadily since 2011. Over 90% of the increase in domestic natural gas production has happened in the seven most prolific shale formation regions, with the largest increases coming from Marcellus. While the states within those shale regions produce the highest volumes of natural gas, there is a broad area of production across the majority of the United States.

      Gas storage levels also plays a key role when looking at supply side. Natural gas in storage provides a valuable cushion to meet peak demand. During periods of lower demand, surplus can be injected into storage facilities. The natural gas storage infrastructure can be utilized to accommodate sudden rises or falls in demand, up to a certain point.

      Overall, natural gas supply is characterized as being quite responsive to a relatively wide range of prices. However, restrictions of the existing infrastructure impact additional flows, rendering the supply curve very inelastic even when prices are high. On the demand side, overall economic growth, weather and competing fuel prices affect gas demand. Here is a general breakdown of the demand of natural gas across the some of the main sectors.

      Demand of Natural Gas

      When it comes to electrical power generation, natural gas power burn has been increasing due to low gas prices relative to coal. The second largest sector is within industrial usage. Natural gas is used as raw material to produce fertilizer, chemicals, and hydrogen.

      Residential and commercial sector utilize gas as a fuel for heating or cooling purposes. Natural gas suppliers are usually insulated from short-term fluctuations through existing tariffs. The transportation sector accounts for a small amount of natural gas used as vehicle fuel from liquefied natural gas or LNG.

      Over the last few years, the United States has seen the development of new LNG exporting terminals, mostly in the gulf coast region. The demand for natural gas for LNG export to international markets is expected to rise significantly.

      Natural Gas and Weather

      Gas demand has a high price-sensitivity to changes in weather. Weather pattern changes are the primary contributor to gas price volatility. Gas prices also show a clear seasonal pattern with higher prices in fall and winter months in response to higher demand for heating. And lower prices the spring and summer months as demand drops.

      Summary

      When traders look at the supply and demand for natural gas in the United States, there are a variety of variables that impact the product, distribution, and use of this product throughout the year.


      Test your knowledge

      Related Courses
      /content/cmegroup/en/education/courses/introduction-to-energy/introduction-to-natural-gas/understanding-supply-and-demand-natural-gas
      • {{ course.name }}
      Previous Lesson
      Next Lesson
      Course Overview
      Get Completion Certificate
      Previous Lesson Next Lesson
      • YouTube
      • Twitter
      • Facebook
      • LinkedIn
      • Instagram
      • Rss

      CME Group is the world's leading and most diverse derivatives marketplace. The company is comprised of four Designated Contract Markets (DCMs). 
      Further information on each exchange's rules and product listings can be found by clicking on the links to CME, CBOT, NYMEX and COMEX.

      © 2021 CME Group Inc. All rights reserved.

      Disclaimer  |  Privacy Policy  |  Cookie Policy  |  Terms of Use  |  Data Terms of Use  |  Modern Slavery Act Transparency Statement  |  Report a Security Concern