Answer:
Crude oil and natural gas are both energy commodities. As such, we use these fuels to heat and cool our homes or supply other energy needs. The price relationship between crude oil and natural gas is an inter-commodity spread, in which the prices between the two change in relation to each other.
Historically, in an inter-commodity spread, when one becomes more expensive, the other will be more desirable for consumers because of the lower prices and higher supply.
Many companies that produce crude oil also produce natural gas. Natural gas and crude oil exploration and production are often related because the release and capture of natural gas can occur during the oil drilling process.
The relationship between crude oil and natural gas changed around the turn of the 21st century due to the discovery of more natural gas reserves in the United States.
Huge natural gas reserves, previously undiscovered in the Marcellus and Utica shale regions of the U.S., altered the price relationship between these two energy commodities, lowering the price of natural gas in the U.S. while the price of oil continued to rise between 2000 and 2014.
Attributed to slowing growth of emerging economies and a reduction in oil demand, a drastic drop in the price of crude oil occurred in late 2014, continuing through early 2016. By 2018, the price of crude oil crept back up to over $70 per barrel. However, due to the coronavirus in 2020 almost halting demand for oil, crude oil prices dropped to historic lows, while natural gas dropped a little, but held pretty steady.
