Natural Gas Futures

Market

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.

History

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.

Facts

  • Natural gas futures are traded on the InterContinental Exchange (ICE), the New York Mercantile Exchange (NYMEX) and the Multi-Commodity Index (MCX) in India.
  • Weather patterns are the best-known price drivers for this commodity futures product, but in recent years global tensions have had a nearly equal impact.
  • Oklahoma, Louisiana, Texas, and New Mexico account for 80 percent of the natural gas production in the U.S, while Mexico and Canada account for a small portion of the total consumed.
  • One natural gas futures contract on the New York Mercantile Exchange is 10,000 million British thermal units (mmBtu).
  • Delivery months for natural gas futures occur during all months of the year.

Trading

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 Specifications 

Contract SymbolContract UnitPrice Quotation
GNG10,000 mil mmBtudollars per mmBtu
Trading ExchangeTrading HoursTick Value
CME GLOBEX18:00 - 17:15$0.001 per mmBtu

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This material has been prepared by a sales or trading employee or agent of RJO Futures and is, or is in the nature of, a solicitation. This material is not a research report prepared by RJO Futures Research Department. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions.