Natrural Gas Futures Contracts:
- Ticker Symbol: NG
- Exchange: NYMEX
- Trading Hours: 9:00 AM until 2:30 PM EST.
- Contract Size: 10,000 million British thermal units (mmBtu).
- Contract Months: all months(Jan. - Dec.)
- Price Quote: $/MMBtu. Ex $6.50 per MMBtu
- Tick Size: $0.001 (0.1¢) per mmBtu ($10.00 per contract).
- Last Trading Day: Three business days prior to the first calendar day of the delivery month.
Natural Gas Fundamentals:
Natural gas produces almost a quarter of the United States energy consumption. Natural gas is used to provide energy for homes, commercial buildings and utility plants.
The natural gas futures contract on the New York Mercantile Exchange consists of 10,000 million British thermal units (mmBtu). A Btu refers to the amount of natural gas required to heat one pound of water by one degree at normal pressure. There are about 1,027 Btu in one cubic foot of natural gas.
Natural gas is transported by pipelines throughout the country.
Natural Gas - Supply:
The largest producers are of natural gas in the United States are Texas, Federal offshore Gulf of Mexico, Oklahoma, New Mexico, Wyoming and Louisiana; respectively.
Russia and the United States account for about 42 percent of the world production of natural gas. Russia produces about 22 trillion cubic feet(tcf) and the U.S. produces about 19 tcf.
Natural Gas - Demand:
The United States consumes about 25% of worldwide consumption.
The U.S. consumes all of the natural gas it produces and imports the remainder mostly from Canada.
The heaviest demand for natural gas is during the winter months. Colder than normal winters can increase demand for natural gas. Summers are usually the lowest demand periods for natural gas. Extremely hot periods during the summer can spike demand for natural gas.
About 25% of natural gas consumption goes to residences, 16% to commercial, 24% to commercial utility plants and 35% to industrial establishments.
Tips on Trading Natural Gas Futures:
- Natural gas is one of the more volatile commodities markets. This is evident in the high volatility premiums that natural gas options have.
- Natural gas futures will react quickly to any tropical storms that move into the Gulf of Mexico. Most of the natural gas operations are in and along the Gulf and they are suseptible to damage and production losses. Hurricane Katrina is a prime example where natural gas prices rose to all-time highs due to the destruction.
- Natural gas futures are very dependant on the weather - mainly in the winter. Prices can spike quickly when extreme cold weather hits.