As Part of the final summations on 2010, here is a short review on the main changes that occur to the natural gas spot price (Henry Hub) and crude oil price (WTI) through the month of December, and their relationships to major currencies.
In the following table I present the correlations of major currencies to natural gas spot price (Henry Hub) and crude oil price (WTI), on a daily percent changes scale, for the month of December:
The main results show a strong correlation (0.58) between AUD /USD and crude oil price, i.e. on roughly 58% of the time, as the AUD (Australian Dollar) appreciated against the USD (US dollar), crude oil price rose and visa versa. This is a stronger correlation than it was in the previous month – during November the level of correlation was only 0.46 between AUD /USD and crude oil price.
There was also a strong correlation between crude oil price and USD/CAD of -0.51. This correlation, however, was lower in December than in November, which was -0.64 back then.
Natural gas spot price (Henry Hub) was much less correlated to major currencies, than crude oil price was. The most correlated exchange rate to Natural gas was the USD/YEN with a -0.29 correlation. This was very similar to the level of correlation registered during November (-0.31).
When comparing natural gas spot price with crude oil price, I see a very weak and positive correlation of 0.19.
The following chart of crude oil and natural gas prices presents these energy commodities after their prices were normalized to the beginning of the month 100= =1/12. The chart shows that oil price had a moderate and stable upward trend throughout the month, while natural gas spot price changed with less apparent trend as it had a steep increase until the middle of the month and afterwards declined sharply. In the end of the month, natural gas rose moderately and finished with a 1.5% rise from beginning to end of month.
Crude oil price finished the month with a nearly 6.5% increase from beginning to end of month of December.
In the final graph, I present a crude oil charts compare to major currencies, such as EURO/USD and AUD/USD. Again the prices were normalized to the beginning of the month, i.e. 100= =1/12.
In conclusion, for the month of December crude oil price (WTI) presented an upward trend, and it remains very correlated to major currencies especially to the Australian Dollar and Canadian Dollar; natural gas spot price (Henry Hub) showed a much more erratic behavior but still finished the month with a moderate rise, and still showed a very weak correlation to major currencies.
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