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How to Trade Natural Gas: Key Data to Watch

Being one of the most traded commodities in the world, Natural Gas is a great asset for day and swing trading. It is far more volatile than crude oil and other petroleum-based products and is liquid enough so investors can easily place orders and get instant market execution. 

Once you have realized natural gas trading basics, the only thing you need to ensure you know before starting trading natural gas is what key data and reports to follow. So, in this article, we’ll mention the most important reports and data you need to watch that affect natural gas prices.

Key Points to Take Away

  • Natural gas is one of the most vital sources of energy in the world and is a popular asset for day trading.
  • There are five reports and data announcements that affect natural gas prices. These include the EIA Weekly natural gas storage report, Natural Gas Imports and Exports, EIA Natural Gas Storage Dashboard, OPEC Monthly Oil Market Report, and Baker Hughes Drilling Report of Active Rigs.
  • Other crucial factors that impact natural gas prices include seasonality, extreme weather conditions of heat and cold, storage, and increased demand due to global economic growth.

First, What Are The Ways to Trade Natural Gas?

Basically, there are two ways for individual investors to actively trade natural gas. The first way is through futures contracts traded on futures exchanges – those include the Henry Hub Natural Gas futures that trade on the New York Mercantile Exchange (NYMEX), which is now owned by Chicago Mercantile Exchange (CME Group), and the UK Natural Gas futures that trade on the Intercontinental Exchange (ICE). 

While trading futures is a way to get exposure to natural gas markets, it must be noted that the requirements to open an account are quite strict and the tick value is worth $10. This makes it a relatively heavy contract for average traders as the price of natural gas futures contracts fluctuates in sizes of $0.001. Additionally, the CME has recently added the e-Mini Natural Gas futures with a minimum price fluctuation of $0.005. However, while the cost of trading the e-Mini natural gas contract is lower, the tick value is higher at $12.5.

Another factor to consider in the case of futures contracts is the margin requirements. The vast majority of futures brokers usually require an initial margin requirement of around $1600 and a maintaining requirement of around $1400.  The bottom line, while there are many advantages to trading natural gas futures, the process is quite complicated and unless you have a large initial amount of money to start trading, it is certainly not the most preferred option. 

The second option, CFDs, on the other hand, requires a fairly simple process of account creation and low initial deposit requirements. Because natural gas is such a popular commodity, many CFD brokers including SwitchMarkets offer traders this option. 

Generally, natural gas CFDs enable investors to speculate on the price movements of natural gas. However, unlike futures contracts, when trading CFDs, it can be done without taking any ownership of a physical commodity underlying asset. This basically means that you’ll be able to trade with leverage and utilize a small amount of capital to open positions. For example, SwitchMarkets allows users to start trading natural gas with an initial deposit of just $50, and a leverage ratio of 50:1.  

Fun Fact

Not many people are aware of the fact that natural gas is the cleanest burning fossil fuel – even more than burning woods. 

5 Reports and Data That Affect Natural Gas Prices

Much like any other commodity in the world, there are several natural gas reports being published for the public. The reports are there to provide supply and demand information for producers, importers, and day traders, mainly due to the huge role of natural gas in our society. 

With that in mind, below you can find some of the most important data to watch if you are trading natural gas: 

1. EIA Weekly Natural Gas Storage Report

The most important report to watch is most likely the Energy Information Administration (EIA) Natural Gas Storage report. Basically, it measures the gas storage in the United States, which is the largest producer and the largest consumer of nat gas in the world.

The EIA weekly natural gas storage is released every Thursday at 10:30 a.m. EST (15:30 GMT).  To follow natural gas EIA reports, you can visit the EIA website or follow the data on our economic calendar.

2. Natural Gas Market Imports and Exports

Another extremely important report is the Natural Gas imports and exports quarterly report that is being released by the Office of Fossil Energy and Carbon Management. The report obviously has a significant impact on natural gas prices in the US, so watching the report and knowing the time of release is crucial for natural gas traders. 

Additionally, you can find the last natural gas imports and export report for the second quarter of 2021

3. EIA Natural Gas Storage Dashboard 

The EIA natural gas storage dashboard (DOE) is perhaps the most comprehensive report of all, especially if you wish to deeply analyze natural gas storage status and other crucial factors.

natural gas storage

4. OPEC Monthly Oil Market Report

Another report to watch is the OPEC oil market report that is being published monthly, usually between 11-15 of the month.  

The report covers all issues impacting oil market trends around the world, including the monthly OPEC output, natural gas liquid demand and supply, etc. 

To find all the OPEC reports and the publishing schedule.

5. Baker Hughes Drilling Report of Active Rigs

Baker Hughes Drilling Report of Active Rigs is a weekly report released at noon Central Time on the last day of the workweek. It is an important indicator for oil and natural gas as the active rig count indicates the demand for products used in drilling in the United States and Canada. 

To find more information read the full monthly oil market report.

*In addition to the above, it is also highly recommended to visit the EIA natural gas weekly update that includes plenty of information including natural gas production, weather transportation, storage, weekly chart, etc. It is a summary of the natural gas industry and shows the latest news that relates to natural gas and other energy products. 

Other Factors That Impact the Price of Natural Gas

Generally, there are several factors that drive the price of natural gas. These include:

  • Seasonality
  • High demand and low supply 
  • Weather events
  • Natural Gas storage
  • Energy technological improvements
  • Development of green energy
  • Geopolitical Events in the leading importing and exporting countries. The largest LNG producing countries include the United States, Russia, Iran, and Canada. In 2020, leading exporting countries include Qatar (16.2%), United States (15.5%), Australia (12.7%), and Norway (6.4%). Top importing countries include Japan (21%), China (19%), South Korea (11%), and India (N/A). 
Natural Gas Top Importers and Exporters 2021

The Bottom Line

Clearly, natural gas is one of the most vital resources of energy in the world. According to the EIA, it was the largest source of US electricity in 2020, with around 40% of the total US energy consumption. It also accounts for about 23% of global energy demand.

Being such an important source on the planet, it does not come as a surprise that there are several reports and data to watch if you are planning to trade natural gas. The reports above will help you to analyze natural gas markets as part of your trading strategy and take trading actions in the markets. 

FAQs

What does LNG stand for?

LNG stands for liquified natural gas and is a state in which natural gas has been converted to a liquid form for the ease of natural gas transport. 

How to trade natural gas reports?

To trade natural gas reports, you first need to make a schedule of all the reports that affect natural gas prices. Then, try to find out how each result impacts natural gas prices (preferably on a demonstration account), and use technical analysis tools to determine entry and exit points. 

What is the trading symbol for natural gas?

Generally, the trading symbol for the natural gas spot market is NG. For natural gas futures contracts, the trading symbol varies depending on the expiration month (NGZ1 for December, NGF2 for January, NGG2 for February, etc)

What is the Henry Hub?

Henry Hub is a famous natural gas pipeline located in Louisiana, United States, and is the most well-known trading point for natural gas deliveries. For that reason, the natural gas futures contracts on the CME are called the Henry Hub Natural Gas futures. 

What is the best natural gas ETF?

Apart from the methods above that include futures contract and CFDs, a trader can also trade gas ETFs via the stock market. This way, you benefit from investing in a basket of companies that provide natural gas services. Some of the best ETFs include the ProShares Ultra Bloomberg Natural Gas, ProShares UltraShort Bloomberg Natural Gas, and the United States Natural Gas Fund LP.

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