Natural Gas is a very important energy asset used in a great variety of applications including heating, transportation, commercial and industrial settings

Trading the Natural Gas (NG)

Natural Gas is a very important energy asset used in a great variety of applications including heating, transportation, commercial and industrial settings. The great advantage of Natural Gas is that is it is both economical and environmentally friendly.

 

Which Financial Instruments can be used for Natural Gas Trading?

Natural gas can be the underlying asset of futures & options contracts. But it can be also traded via the use of ETFs or as a stock that represents a natural gas company.

(i) Natural Gas Futures and Options

(ii) Natural Gas Contracts for Difference (CFDs)

(iii) Natural Gas ETFs and Stocks

Natural Gas Futures Contracts can be found on multiple exchanges such is the NYMEX (New York Mercantile Exchange), Multi Commodity Exchange (MCX), USFE (US Futures Exchange) and ICE (Intercontinental Exchange).

 

What Influences the Natural Gas Price?

The natural gas price can be influenced by many different factors:

(1) The General Conditions of the Global Economy

When there are concerns about the potential economic crisis on a global scale then the price of Natural Gas faces a lot of pressure as any other energy asset.

(2) Weather Forecasts

Heavy winters are favoring the consumption and the demand for Natural Gas.

(3) Political Conditions and War

The greatest Natural Gas resources are found in the Middle East and in Other Places characterized by political instability. Important political events or war in countries-producers of Natural Gas can drive its price in very high levels.

(4) The Price of the US Dollar

As in the case of any other energy asset priced in USD, the price of Natural Gas is sensitive to strong US Dollar moves against other important currencies.

(5) Technology

As more cost-effective ways of liquefying the natural gas are emerging the more popular this energy asset will be in the future. Note that the liquefied natural gas can be easily stored.

Graph: Natural Gas to Europe -New Pipeline Projects

Natural Gas to Europe -New Pipeline Projects Chart

 

Natural Gas Production & Highest Reserves

Natural Gas can be driven to consumption directly from the oil fields where it is piped.

 

Country

Natural Gas Production

(in Million Cubic Meters)

Proven Natural Gas Reserves

(in Million Cubic Meters)

1

United States

611,000

9,460,000

2

Russia

588,900

48,700,000

3

Canada

152,300

58,200,000

4

Iran

138,500

33,600,000

5

Qatar

116,700

25,100,000

6

Norway

106,300

2,070,000

7

China

102,500

4,643,000

8

Netherlands

85,170

1,416,000

9

Algeria

85,140

4,502,000

10

Saudi Arabia

83,940

8,200,000

--

Turkmenistan

  17,500,000

--

Venezuela

  5,524,500
 

World

  187,300,000

 

ECN Execution and Minimal Trading Spreads..

 

Natural Gas Consumption

The ten countries with the largest Natural Gas consumption.

 

Country

Natural Gas Consumption

(in Million Cubic Meters)

1

United States

683,300

2

Russia

414,100

3

Iran

137,500

4

China

129,000

5

Japan

100,300

6

Germany

99,500

7

United Kingdom

94,280

8

Saudi Arabia

83,940

9

Canada

82,480

10

Italy

77,800

 

Natural Gas Consumption in 2040

Measured in cubic feet, the total natural gas consumption in the US is expected to grow from 26.0 trillion cubic feet today to 31.6 trillion cubic feet in 2040 (Source: EAI-AEO2014). The consumption of Natural gas is expected to increase as concerns all sectors except the residential sector.

Image: The Growth of the Consumption of Natural Gas in the US

The Growth of the Consumption of Natural Gas in the US

 

 

Essential Information When Trading the Natural Gas

Natural Gas ETFs

Long-term Natural Gas traders can invest in tradable ETFs. Here is a list of the most important tradable ETFs, listed on US exchanges.

ETF NAME

Symbol

Assets Value

The United States Natural Gas Fund, LP

UNG

$652 million

3x Inverse Natural Gas ETN

DGAZ

$339 million

3x Long Natural Gas ETN

UGAZ

$150 million

ProShares Ultra Bloomberg Natural Gas

BOIL

$38 million

ProShares UltraShort Bloomberg Natural Gas

KOLD

$37 million

iPath Dow Jones-UBS Natural Gas Subindex Total Return ETN

GAZ

$24 million

The United States 12 Month Natural Gas Fund

UNL

$16 million

ETRACS Natural Gas Futures Contango ETN

GASZ

$11 million

 

 

Trading Natural Gas Tips & Strategy

Here are some key points when trading natural gas:

(1) Natural Gas trading is characterized by high volumes and strong moves. Therefore, trade Natural Gas by following the master trend unless there is an important news update. If the news is important violent daily swings are a common phenomenon.

(2) Natural Gas is very sensitive to weather patterns. Many Natural Gas investors use Seasonal Strategies. Such Natural Gas strategies can be applied best during the high-demand winter months.

(3) Mid-Term Natural Gas traders monitor the 2-weeks forecast as concerns expected temperature changes.

(4) Usually, the Natural Gas is traded in line with the crude oil.

(5) The Natural Gas price is usually following cycles lasting 5-6 months.

(6) Instead of trading Natural Gas Futures and Options you may find it easier to trade an ETF. The most tradable ETF in this category is the UNG (The United States Natural Gas Fund).

(7) At times when the price of Natural Gas has dropped excessively and there is the anticipation of higher prices, it is better to invest in natural gas stocks than the commodity itself. Natural gas transmission entities usually own large natural gas inventories.

 

PAMM 250

 

Brokers Offering Natural Gas CFDs & Futures Trading

Here is a list and information about CFD & Futures Brokers offering Natural Gas Trading:

BROKER COMPANY INFO TRADING INFO
VISIT BROKERS

XEMARKETS (XM)

Founded in 2008

Supervised by: FSA, BaFin, CySEC
US Residents: No

Trading Bonus 30%
Min Deposit: $50

Min Trading Spread: 1 pip
Max Trading Leverage: 1:888
 
Energy Assets:
Crude Oil
Crude Light
Natural Gas
VISIT BROKER

HOTFOREX


Founded in 2007
Supervised by: CySEC, MiFID
US Residents: No

Welcome Bonus 100%
Min Deposit: $50


Min Trading Spread: 1.8 pip
Max Trading Leverage: 1:500
 
Energy Assets:
Crude Oil

 
 
 

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