Natural gas futures are a commodity futures product based on the fuel natural gas, which is used extensively throughout the U.S. to heat homes and also has important applications in commercial and industrial settings. Trading natural gas futures grew out of a need to control price volatility with risk management. It is measured by volume and heating quality. Demand peaks with winter's heating needs and summer's air conditioning usage. Natural gas, as a commodity, is a convenient energy source that is piped directly from oil fields into homes. Produced domestically, it is distributed to more than 60 million homes and is considered to be a key source in generating electricity and providing energy for new homes. It is considered an alternative and cleaner burning fuel compared to coal as an energy source. As the competition between the two raises, price volatility in the commodity futures product follows suit.
Natural gas was once considered an ineffective byproduct of oil production. Starting in the late 1970s, natural gas futures are relatively new in comparison to other commodity markets. The alternative name for natural gas, “Henry Hub”, originates from the gas pipeline with the same name which runs through Erath, Louisiana.
Traders of natural gas futures watch weekly storage and inventory reports published by the Energy Information Administration (EIA), an independent agency of the United States Department of Energy. New information regularly disseminated to the market induces price volatility, which can range from barely noticeable to extreme because though the information is anticipated, its content may not be in line with the market's expectations.
You can learn more about Energies futures by downloading our guide, Free Fundamentals of Trading Energies Futures.
|Contract Symbol||Contract Unit||Price Quotation|
|GNG||10,000 mil mmBtu||dollars per mmBtu|
|Trading Exchange||Trading Hours||Tick Value|
|CME GLOBEX||18:00 - 17:15||$0.001 per mmBtu|