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With high natural gas production and a historic warm winter, where are the natural gas futures trading profits?
Folks across the northern USA are reveling in the mildest winter in many years.
They are also using their furnaces less! Natural gas futures for April delivery have fallen from around $5.50 to around $2.25 per million BTUs (British Thermal Units).
The excess supply (nearly fifty percent higher than at this time a year ago) held by natural gas suppliers is in large part why prices have plummeted.
Weather forecasters tell us that the unseasonably warm weather will continue over the eastern United States through the end of March, the end of the “heating season.”
While near term futures reflect the current glut in natural gas supplies prices out a year for April 2013 delivery run about $3.30 for a million BTUs.
April 2014 futures are $3.74. In the longer term traders expect prices to rise again.
Thus April 2020 futures are around $5.20 per million BTUs.
Prices for physical delivery at the Henry Natural Gas Hub in Louisiana are considered a benchmark.
Next day delivery prices at the Henry Hub dropped by ten cents over just a week recently as a “real” northern winter failed to materialize this year.
Those who saw this coming and sold futures at old prices are reaping very nice natural gas futures trading profits.
There is little risk of insider trading upsetting this market as the fundamentals are out there for everyone to see.
Washington Is Happy
The United States has reclaimed its status as the world’s leading natural gas producer and may, indeed, resume its position as the world’s leading oil producer as new technologies fuel increased oil extraction from previously impossible formations.
The USA has reduced its dependence on foreign oil from 55% to 45% of crude oil consumption, a million barrels a day.
More fuel efficient cars and increased insulation of homes have also helped reduce energy requirements.
On the other hand the US economy is still just coming out of the worst recession in 75 years.
When factories start humming they will need more fuel and both oil and natural gas prices will likely rise.
A distant but real problem that bothers Washington and drives oil prices is the risk of an armed confrontation with Iran over its nuclear power aspirations.
Although natural gas traders are also concerned about the economy and world affairs they try to adopt a dispassionate attitude.
To make natural gas futures trading profits a trader needs to follow fundamental and technical analysis of gas prices and not invest in what they “hope” will happen.
How Natural Gas Is Traded
Natural gas futures are traded on the NYMEX, the New York Mercantile Exchange.
It is traded in unites of 10,000 million BTU’s while prices are quoted per million BTUs.
A penny change in the quoted price is difference of $100 in natural gas futures trading profits.
Futures contracts are available for the 36 months from the current date.