Natural Gas Futures


Natural gas futures are primarily used by large end users, commercial companies that buy large amounts of natural gas or those that run a premium on the commodity and trade it on an exchange.

More About Natural Gas Futures

Continue reading to learn more about:

How do natural gas futures work?
Can you trade natural gas futures?
How are natural gas futures settled?
What affects natural gas futures?
Additional Information About Natural Gas


1 Step 1
keyboard_arrow_leftPrevious
Nextkeyboard_arrow_right

How do natural gas futures work?


Natural Gas Futures offers you flexibility and choice through variable size positions and a suite of contract types. Natural gas, or methane, is the cleanest-burning fossil fuel and one of the world's most important sources of energy. Natural gas is used primarily for heating and cooking and to power electricity generating plants that produce approximately 30% of the nation's electricity.


 
 

Can you trade natural gas futures?


Yes, you can trade natural gas futures. Natural gas is one of the most widely traded commodities in the world. A futures contract is an agreement between two parties to buy or sell a commodity for a specific future date and price. Products traded on futures markets are not instantly delivered like products bought on cash or spot markets. In other words, traders who buy and sell Futures contracts must wait until settlement date before they will receive or pay for their purchase.

 

How are natural gas futures settled?

•Natural gas futures settle differently than most futures contracts. Producers who sold the futures contacts in the case of a rise in price or consumers/refiners who bought the contracts if prices fall, neither party has to deliver or take delivery of the actual product. They just settle with cash reflecting the difference between the price at which they sold/bought and the settlement price.
•Natural gas futures involve contracts between buyers and sellers. The price agreed upon when entering into the contract takes into account the expected supply and demand of natural gas. Futures contracts are not intended to cover the entire future value of natural gas, instead they are only settled after the contract has matured.
 
  • What affects natural gas futures?

    Shorter-term natural gas futures are affected primarily by weather, especially in the heating season, when increased gas demand from utilities and residential consumers causes prices to rise. Longer term contracts, however, are more influenced by expectations of natural gas supply growth and by overall market conditions such as the spot price for crude oil.
  • Additional Information About Natural Gas

    Natural gas is a fossil fuel and it burns with much less soot and carbon than coal, oil or petrol. For this reason natural gas is regarded as a clean burning energy source. In the USA, the largest single use of natural gas is to make electricity and in China the single largest use of natural gas is for making fertilizer. Natural gas is widely used to heat homes, especially in northern Europe where winter temperatures can reach -25C. Natural gas futures are contracts to buy or sell natural gas at a future date, when a number of different factors can influence prices, such as an increase in demand or possible future price controls.