What We Do
Gas trading refers to the buying and selling of natural gas as a commodity in various markets.
Natural gas is a vital energy source used for heating, electricity generation, and industrial processes. Gas trading can occur through various platforms, including physical delivery, futures contracts, options contracts, and financial derivatives.
What is natural gas?
Natural gas is usually mistaken to be a by-product of crude oil together with gasoline and heating oil, but it actually isn’t. Natural gas exists alongside oil reserves, but it is not processed from crude oil like gasoline or heating oil.
Natural gas is one of the cleanest energy supplies due to its low carbon dioxide emissions when burnt. The drilling technology used for the production of natural gas has advanced notably in recent years making it a key commodity to cover energy needs in the future.
Since natural gas is found near oil reserves, it also needs to be extracted from the ground. After the extraction process, natural gas is processed into gas and liquid forms in order to make it suitable for transport across countries. To ensure that the extracted natural gas meets the required quality specifications before distribution, it is transported to specialist plants to be examined, treated and stabilized. These extraction and treatment processes are costly and any trouble in the operation of these processes can greatly impact the price.
The uses or purposes of natural gas include heating, electricity generation and cooking using gas stoves. Though the electricity market is the major gas consumer, most of its applications are household-related.
Gas trading is influenced by various factors, including supply and demand dynamics, weather conditions, geopolitical events, economic indicators, and regulatory policies. Traders and investors analyze these factors to make informed decisions about buying, selling, or holding gas contracts.
It's essential for gas traders to stay updated on market developments, monitor price trends, and assess risk factors to optimize their trading strategies and maximize profits. Additionally, gas trading involves compliance with regulatory requirements and adherence to industry standards to ensure fair and transparent markets.
Physical Delivery
This involves the actual transfer of natural gas from a seller to a buyer. Gas trading companies may buy and sell natural gas on physical markets, either through pipelines or in liquefied form (LNG) transported via ships.
Futures Contracts
Futures contracts are agreements to buy or sell a specific quantity of natural gas at a predetermined price on a specified future date. Gas futures contracts are traded on exchanges such as the New York Mercantile Exchange (NYMEX) or the Intercontinental Exchange (ICE). These contracts allow market participants to hedge against price volatility or speculate on future price movements.
Options Contracts
Options contracts give the holder the right, but not the obligation, to buy or sell natural gas at a predetermined price (strike price) within a specified time frame. Gas options provide flexibility to traders who can either hedge their positions or speculate on price movements without committing to a futures contract.