Brent Price Influence On Natural Gas Industry

Brent price
Prices of crude oil have their influences on natural gas industry. Brent crude oil comes from North Sea and is a crucial part of oil industry as 2/3 of internationally trade crude oil supplies use Brent as benchmark.

Marketed production and Consumption
Its influences on the market price were highlighted in previous sections; therefore it is important to include them to the analysis. What turns out to be an interesting data to observe is their ratio Production/Consumption. Up to now it has not reached number 1, but it is slowly getting closer to this point. It is important to point out that all three variables are correlated and if there put in an analysis, together they might change results of the analysis in a large extend.

National Weather Service and Climate Prediction Center also provide information about HDD (heating degree days) which stands for a measure how to reflect energy needed for heating up houses and commercial places. National Weather Service also dispose of data called HDD deviation that represents differences of HDD measured and its normal value (average of values from 1971 until 2000) in that period.

Exchange rate may have also an influence on energy prices. Its influence in 2008 when weaker dollar raised prices of energy source was mentioned in section . OANDA is an information provider for forex trading and currency with subsidiaries all over the World. It is a highly confidential database that had been on market since 1995 and serves with business-to-business services.

For Henry Hub price, Brent price, Production, Consumption, Import and Export a certain detrending was used. Differences of the values with their average values for the years 2001-2014 were incorporate to data to clarify whether the differences from normal values have more influences on the market than their original values. They are marked as dev Henry Hub price, dev Brent price, dev Production, dev Consumption, dev Import and dev

This would solve the non existence of stationarity in variables. The key point is to run two step method proposed by Engle and Granger, save residual and test them by unit root for stationarity. The key point was to compare the t-test with MacKinnon critical value table . The cointegration was calculated since 1989 and started to appear in period 1989 – 2003 through the followed years until its peak in 2006. Since 2007, the values of MacKinnon test show worse ground to calculate cointegration. Cointegration was counted with a consideration of time trend, which turn out to be really important. By futher analyzing of relatively close papers focused on this topic, two publications of research were based on the cointegration. First one was testing data since 1989 until 2005 and the second one since 1997 until the first half of 2007