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 wars 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 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 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 |
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
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-week forecast as concerns expected temperature changes.
(4) Usually, Natural Gas is traded in line with 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 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.
Brokers Offering Natural Gas CFDs & Futures Trading
Here is a list and information about CFD & Futures Brokers offering Natural Gas Trading:
|
FOREX BROKER |
NATURAL GAS TRADING |
PLATFORMS |
ACCOUNT |
INFORMATION |
|
REGULATED BY:
US TRADERS: NO |
NATURAL GAS SPREADS:
OVERNIGHT SWAPS: At the time of the review:
|
PLATFORMS: □ MetaTrader-4 □ MetaTrader-5 □ cTrader SCALPING: YES
|
$200 Minimum Account for all trading platforms FUNDING METHODS
|
Wide Asset Index and Fast Order Execution WEB-SITE: |
|
» LQDFX REGULATED: (N/A) US TRADERS: NO |
NATURAL GAS SPREADS:
|
PLATFORMS: □ MetaTrader-4 SCALPING: YES FREE VPS: NO PAMM ACCOUNT: NO |
$20 Minimum Deposit Amount FUNDING METHODS
|
WEB-SITE: REVIEW: |
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