Falling Gas Prices and its Effect on the World’s Economy

Natural gas has plummeted to a three year low, a situation attributed to the huge surpluses that have triggered panic selling at the international oil market.

This is a setback for a commodity that has consistently struggled throughout the year due to the plunging crude oil prices. The prices continued to plummet due to surging demand from power producers who are switching their allegiance towards production using the less expensive coal. The demand is also subsiding due to the hot weather conditions prevalent throughout the country and most homes and organizations are switching to air conditioners that are deteriorating matters for gas producers.

According to United States Energy Information Administration, by September 25th 2015, gas producers had already stockpiled 98 billion cubic feet gas into their storage systems. This is already a huge figure considering the fact that 106 billion cubic feet gas were added into the storage’s the preceding week.

Holt & Co which is an iconic investment group, estimates that such weekly additions translates into an oversupply of 3 billion cubic feet, whereby these huge surpluses are already threatening the lucrative winter prices. This situation puts the storage at 15% above their level a year back. This is indeed a very worrying trend.

Going by the fact the gas prices are historically low, chart traders are more likely to push even lower, a situation that could impact negatively on the leading global indices hence affecting stock prices and foreign currency fluctuations.

In the continental U.S the prices haven’t changed either, and production in July was only 5.4% above the same period one year ago. For a period of four months, the prices have just been sideways, as opposed to moving up. This situation is likely to transpire as the ugliest for futures business considering a key economy such as China has already devalued their currency the Yuan.

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