Natural gas is a fossil fuel which in its pure form is amorphous, color- and odorless. In its mixture of different hydrocarbons (such as methane, ethane, propane and butane) as well as – inter alia – carbon dioxide, nitrogen and hydrogen sulfide. It can even contain noble gases like helium. Natural gas emerges in a similar way as crude oil and therefore it is also often found together with crude oil in subterranean repositories. Natural gas attains either via pipelines or through transport with special tankers into the industrial regions.
Natural gas has become one of the most important energy sources since its first commercial usage in Great Britain 1785. It covers about 25 % of the global energy needs. Natural gas is gaining evermore importance as fuel for cars and as heating gas in private homes.
The main producing countries are Russia with 22 % and the U.S.A. with 20 % share of the world market. Other substantial producing countries are Canada with 6.8%, Great Britain with 3.6 %, Algeria with 3.0 %, Indonesia, the Netherlands, Norway, Uzbekistan, Iran, Argentina, Mexico, Saudi-Arabia, the United Arab Emirates and Malaysia. Important importers of natural gas are the U.S.A., Germany, Japan, Ukraine, Italy, France and Belarus.
According to projections, the ascertained global natural gas reserves will suffice barely 67 years from now. A great deal of these reserves is suggested to be in the Middle East and on the area of the former CIS-countries.
The price for natural gas correlates strongly with the oil price. In Europe even exists a price fixing of natural gas to the price for heating oil.
Natural gas accounts for almost a quarter of United States energy consumption, and the New York Mercantile Exchange’s natural gas futures contract is widely used as a national benchmark price. The NYMEX futures contract trades in units of 10,000 million British thermal units (mmBtu). The British thermal unit mmBtu matches the necessary amount of energy for the calefaction of one pound water by one degree Fahrenheit. (1 Btu = 1,055.06 joule). The price is based on delivery at the Henry Hub in Louisiana, the nexus of 16 interstate natural gas pipeline systems that draw supplies from the region’s prolific gas deposits. The pipelines serve markets throughout the U.S. East Coast, the Gulf Coast, the Midwest, and up to the Canadian border.
Natural gas futures and options provide individual investors with an easy and convenient way to participate in an essential energy market. Due to the volatility of natural gas futures, this market offers the potential for quick and substantial profits and is therefore attractive to speculators. At the same time, however, this is a treacherous market in which speculators can suffer losses. In addition, a broad cross-section of companies – from those involved in exploration and production of natural gas to substantial consumers of energy – can use natural gas futures and options contracts to hedge their price risk.
The E-mini natural gas futures contract, designed for investment portfolios, is the equivalent of 5,000 mmBtu of natural gas, 50% of the size of a standard futures contract. This futures contract is available for trading on the Chicago Mercantile Exchange’s Globex electronic trading platform nearly 24 hours per day, and clears through the New York Mercantile Exchange clearinghouse.
In addition to natural gas futures, NYMEX also lists futures on crude oil, heating oil, and unleaded gasoline.
Natural gas can also be traded at the International Petroleum Exchange (ICE) in London. The futures refer to natural gas for admission into the British gas-network. The quotation takes place in British Pence per 100,000 Btu. Thus, the energy value matches one-tenth of the Henry Hub gas futures.
Both gas futures are very strongly oriented on the respective local energy market and therefore difficult to compare.
Most important stock exchange centers: NYMEX and ICE
Contract-cycles: monthly
Contract-size: NYMEX: 10,000 mmBtu, ICE: 1,000 mmBtu
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