Natural Gas

Natural gas is a gaseous fossil fuel. It is mainly used for heating in households and industrial processes, in power generation, and increasingly as raw material for chemical processes (e.g., fertilizer production).

Transportation is either via pipelines or via liquefied natural gas (LNG) ships. Consequently, the delivery of natural gas is defined via hubs, where one or more pipelines or LNG terminals are connected to, for example, Henry-hub in the United States.

Demand for gas is mainly driven by weather, demographics, economic growth, and fuel competition. Additional price influence is given by storage and exports while the supply is mainly determined by pipeline capacity, storage, gas drilling rates, and weather events like hurricanes, technical issues, and imports. Natural gas consumption in the power sector is expected to grow in Europe as the shift from coal to gas is one of the many possibilities to reduce CO₂ emissions.

Gas is traded on exchanges, for example, NYMEX or ICE. Contract size at the NYMEX is 10 million British thermal Units (btu) with a tick size of 0.001 USD per 10 million btu leading to a tick size of 10 USD per contract. The daily price limit is 3 USD per 10 million btu. Deliveries start at the first calendar day of the delivery month and end at the last calendar day of the month.

Natural Gas