The Natural Gas Futures market is publically traded on the New York Mercantile Exchange (NYMEX) and is part of the CME Group. Power pricing is also strongly influenced by the Natural Gas Futures market. For 10-minute-delayed quotes, click here.
A natural gas futures contract is a standardized contract for the purchase or sale of natural gas for future delivery under the provisions of exchange regulations. The standard contract for natural gas at Henry Hub – a pipeline interchange near Erath, LA, and the standard delivery point for all NYMEX natural gas futures contracts – is 10,000 MMBtu, 10,000 Dth, or roughly 10,000 MCF.
Natural Gas Storage
In the gas industry, there is an injection season (April 1st to October 31st) and a withdrawal season (November 1st to March 31st). During the injection season, natural gas is brought into market areas by pipelines and injected into storage fields (old natural gas wells or salt caverns) where the gas is held until the withdrawal season. During withdrawal season the natural gas is withdrawn from storage fields and consumed by industrial, commercial, and residential customers. The amount of gas injected or withdrawn is the net difference between the gas produced or imported and the volume of gas consumed.
The Energy Information Administration (EIA) measures the size of the injection or the withdrawal on a weekly basis, and releases a natural gas storage report every Thursday at 10:30am. The natural gas futures market will have both short- and long-term reactions to the storage report and this report is an important resource for buyers to regularly monitor.
For more information about storage, you can read the Weekly EIA Natural Gas Storage Report.
The past few years have seen the emergence of shale gas as a major source for natural gas. While shale gas has been around for many years, it only recently emerged as the linchpin to an energy independent United States. For more information on shale gas, Wikipedia offers insightful information and the EIA has published this informative article including projections for shale gas production.
Forecasted weather can have a great impact on the fundamental trading of natural gas. When there is a significant change in weather forecast or a variance to normal weather patterns, there can be a material impact on the futures price of natural gas.
Energy traders rely heavily on weather forecasts to develop their trading positions. The weather can have a huge impact on both storage withdrawals and storage injections in ways you might not have considered. For example, when temperatures in the summer rise, natural gas is diverted from storage injections to gas-fired power generators. This may create a bullish scenario in the energy community due to the uncertainty of refilling storage before the end of the storage injection season.
Amongst many forecasts available, the National Oceanic and Atmospheric Administration (NOAA) publishes a 6-10 day outlook and an 8-14 day outlook.
Historically, hurricanes in the Gulf of Mexico would threaten, slow down, or halt gas production. With the emergence of shale gas, the country’s reliance on production from the Gulf of Mexico has dropped off significantly. In fact, these days Hurricanes make their greatest energy impacts in the form of disruption to electricity service in the affected areas which reduces demand for power and, in turn, natural gas. For complete and up-to-the-minute hurricane information, visit the Weather Underground.