People who are new to energy markets tend to assume that natural gas and crude oil prices move together. They're both fossil fuels, they both come out of the ground, and they're both heavily influenced by the same geopolitical actors. Surely they're correlated.
They are, sometimes. The rest of the time, natural gas does essentially whatever it wants, and crude oil doesn't seem to notice.
Understanding why requires understanding the separate supply, demand, and infrastructure dynamics that govern each market. The relationship between the two is more contextual than structural.
Why You Might Expect Them to Move Together
Natural gas and crude oil share some common territory. Both are hydrocarbons extracted from similar geological formations. Both feed into global energy markets. Both are affected by broad macroeconomic conditions, a global recession reduces demand for energy in general, pulling both prices down.
In markets where energy consumers can substitute between the two fuels, power plants that can switch between gas and oil, for example, a rising oil price can increase natural gas demand as users seek the cheaper alternative, which lifts the gas price as well. This substitution effect was historically more common before natural gas power generation became dominant in its own right.
In some international markets, particularly in Asia and Europe, long-term natural gas contracts have traditionally been indexed to oil prices, creating a structural link between the two. This practice has declined as more gas is traded at spot prices, but the linkage persists in portions of the global LNG market.
Why They Actually Diverge
Natural gas doesn't ship easily. This is the central point. Crude oil flows through pipelines and loads onto tankers with relative ease. It is a global commodity. A barrel of WTI and a barrel of Brent are priced with reference to each other because they genuinely compete in global markets.
Natural gas, by contrast, is expensive to liquefy and transport as LNG. A significant portion of the world's natural gas is still consumed close to where it is produced, in regional markets with limited connection to global pricing. Henry Hub in Louisiana sets the U.S. benchmark price. The TTF hub in the Netherlands sets European prices. Asian LNG spot prices are a third distinct market. These prices can diverge dramatically, in 2022, European natural gas was trading at the equivalent of over $400 per barrel of oil in energy terms, while Henry Hub remained relatively contained.
Demand drivers are different. Crude oil's demand is dominated by transportation, cars, trucks, ships, planes. Natural gas demand is dominated by power generation and heating. A polar vortex sends natural gas prices spiking because everyone in the Midwest turns up their furnace; it has no particular effect on WTI. A surge in air travel demand affects jet fuel and thus crude; it does nothing meaningful for natural gas.
The EIA reports are different clocks. Natural gas storage data comes out on Thursdays (the EIA Natural Gas Storage Report), separate from Wednesday's crude inventory data. The two reports drive separate market reactions on separate days.
When the Relationship Does Matter
The Btu equivalence between natural gas and crude oil, roughly six thousand cubic feet of gas equals one barrel of oil in energy content, provides a theoretical parity level around which the two prices should orbit if energy consumers could freely substitute. When the ratio between oil and gas prices departs dramatically from that parity, it signals something interesting about relative supply-demand balances.
During the U.S. shale boom, natural gas became extraordinarily cheap relative to crude oil as associated gas production outpaced demand growth. Power generators switched from coal to gas; new petrochemical plants were built to consume cheap gas feedstocks; LNG export terminals were constructed to move the surplus overseas. All of these responses were driven by the cheap gas relative to oil, and they are still reshaping the U.S. energy economy.
The Houston Perspective
From where I sit in Houston, the natural gas market has a specific local flavor that crude oil doesn't quite replicate. The Permian Basin produces enormous volumes of associated gas as a byproduct of oil drilling, gas that producers have sometimes struggled to move to market, leading to flaring and occasionally negative natural gas prices at Permian wellheads when pipeline capacity got tight.
Meanwhile, the LNG export terminals along the Gulf Coast have created a direct connection between Henry Hub prices and global gas supply-demand, integrating the formerly isolated U.S. gas market into the world economy. That transformation is less than a decade old and still working itself out.
The Short Answer
Natural gas and crude oil prices are related, but the relationship is loose, context-dependent, and frequently overwhelmed by commodity-specific factors. Watch them as separate markets that occasionally rhyme rather than move in lockstep.
Both prices are on the dashboard. The natural gas chart is on the Natural Gas page.
This article is for informational purposes only and does not constitute financial or investment advice.