What are Natural Gas Futures?
The fourth largest source of energy in the United States, and an abundant resource utilized throughout North America, natural gas plays an integral role in sustaining the power needs of both industry and domestic consumers. Natural gas futures contracts are traded on the New York Mercantile Exchange (NYMEX) providing consumers and energy producers alike with a financial vehicle to hedge their price risk in this volatile market. Likewise, these exchange traded contracts also serve as investment instruments for speculators who trade futures contracts in the hope of profiting off the price differentials that occur as the market rises and falls with shifts in supply and demand. A fairly recent development, natural gas futures were first introduced by NYMEX in 1990. The impetus for the creation of this new market instrument was the U.S. Natural Gas Policy Act of 1978 which deregulated the natural gas industry and opened it up to free market competition. Since its introduction over a decade
