How to trade natural gas?How to invest in natural gas?Gas is not only an essential energy source for our lives (used for cooking, heating, having hot water) but it can also be an excellent trading opportunity.First of all, it must be said that trading on natural gas is mainly carried out by those traders who want to make profits in a short period of time, as the fluctuations of this type of commodity (as commodities are called in British jargon) are quite or strongly accentuated.Volatility can be a great opportunity to profit, but of course, it also carries the highest risk.After seeing how to trade natural gas and how to invest in natural gas, we will learn more about this commodity.Currently the best solution for trading commodities is to take advantage of CFD platforms.For example, an excellent one is that of the broker eToro.It is an authorized broker with innovative services such as social trading that allow you to receive advice to successfully guide your operations.To learn more about eToro's services click here to visit the official website.How to trade Natural Gas?Let's start with natural gas futures.What are its characteristics:What are Futures?A futures contract (more colloquially, futures) is a standardized forward contract, a legal agreement to buy or sell something at a predetermined price at a specific time in the future.The transferred asset is usually a commodity or financial instrument.The predetermined price agreed by the parties to buy and sell the asset is known as the forward price.The specified time in the future, which is when delivery and payment occur, is known as the delivery date.Since it is a function of an underlying asset, a forward contract is a derivative product.Contracts are traded on futures exchanges, which act as a market between buyers and sellers.The buyer of a contract is said to hold long positions and the selling party is said to be the holder of a short position.Since both parties risk their counterpart moving away if the price goes against them, the contract may involve both parties presenting a margin of the contract value with a mutually trusted third party.For example, in gold trading, the margin varies between 2% and 20% depending on the volatility of the spot market.The first futures contracts were traded for agricultural commodities and subsequently futures contracts were traded for natural resources such as oil.Financial futures were introduced in 1972 and, in recent decades, currency futures, interest rate futures and stock index futures have played an increasingly important role in forward markets.The original use of futures contracts was to mitigate price or currency risk.Rate movements allow the parties to pre-set prices or rates for future transactions.This could be advantageous when (for example) a party expects to receive payments in foreign currency in the future, and wishes to protect itself from an unfavorable movement of the currency in the range before payment is received.However, futures contracts also offer opportunities for speculation as a trader who predicts that the price of an asset will move in a certain direction can contract to buy or sell it in the future at a price that (if the prediction is correct) will produce a profit.What are the Risks of Natural Gas Futures?Although futures contracts are oriented towards a future point of time, their main purpose is to mitigate the risk of default by both parties in the interim period.In this perspective, futures trading requires both parties to make initial cash, or a performance bond, known as margin.Margins, sometimes set as a percentage of the value of the futures contract, must be maintained throughout the term of the contract to secure agreement, as at this time the contract price can vary as a function of supply and demand, causing a side of the bag to lose money at the expense of the other.To mitigate the risk of default, the product is marked on the market daily where the difference between the agreed initial price and the actual daily price of the futures is revalued daily.This is sometimes known as variation margin, where the Futures Exchange will draw money from the losing party's margin account and put it into the other party's, ensuring that the correct loss or profit is reflected on a daily basis.If the margin account falls below a certain value set by the exchange, then a margin call is made and the account owner has to replenish the margin account.This process is known as “marking to market”.Therefore, on the delivery date, the traded amount is not the price specified on the contract but the spot value (since any gains or losses have already been previously settled by marking on the market).At the time of marketing, the strike price is often hit and creates a lot of revenue for the "caller".CFDs or Contracts for Difference are financial instruments whose value derives from that of another underlying financial instrument.In the case of CFDs on natural gas, the underlying is that of futures on natural gas.When trading CFDs on natural gas the price is given by that of the futures with the closest maturity with the addition of the spread.The Henry Hub Natural Gas (NG) Futures allow market participants significant hedging activities, which allow them to manage the risk of the high volatility of the price of natural gas, which is influenced by a demand related to climatic conditions (presence or absence of cold).Henry Hub's natural gas futures provide efficient transactions on open and close positions.What are the risks associated with CFDs on Natural Gas?These financial instruments are also not risk-free.CFDs are leveraged products, which means that you can gain exposure to the markets by depositing only a percentage of the total value of the trade you wish to enter.This means that just as you can make a profit if the market moves in your favor, you could also lose more than the deposited amount if the trade moves against you.Let's take an example: if we enter a CFD trade worth € 1000 and the margin rate for the applicable class is 5%, we will simply have to deposit 5% of the total position value, called the Position Margin.So, we will only have to deposit € 50 to open the trade.However, if the price of the product moves against us by 10%, we will lose € 100.That is double our initial investment.This is because our market exposure (or risk) will be the same if we had purchased € 1000 worth of Shares at full value.This means that every slight movement of the market will have a greater impact on our capital than if we had bought the same value, for example, of equities.How to trade natural gas via ETFs?Another financial instrument that can be used is that of ETFs, perhaps using the leverage mechanism, which allows you to reach a large profit from a marginally small investment, even if this also means increasing the risk in a directly proportional way.What are ETFs?These are the Exchange Traded Funds are mutual investment funds, which are traded within the financial markets: they have a passive management as their main feature, since they follow the trend of the underlying index.Through these tools it is possible to do online trading at very low cost in different sectors of the world economy.What influences the price of natural gas?Especially the climatic / atmospheric conditions of the requesting countries.What does this mean?That if natural gas is used for heating, it is normal that this will suffer drops where the average of a year will see significant increases.Another important factor, which has been underlining a lot in recent years, is the price of oil.There is a positive correlation between the two hydrocarbons.What does it mean?That if the price of one increases, that of the other also increases.And viceversa.Finally, the discovery of new fields and therefore a greater quantity of natural gas available, can help to mitigate its price.As is known in economics, the more scarce and rare a good is, the more it costs.Conversely, the more available, the more it costs less.But that is not all.Like all commodities, its price is highly influenced by geopolitical events.In fact, a coup d'état, an electoral result not very close to the establishment, a civil revolution and so on, can cause the control of natural gas to end up in unfriendly hands.Who could take advantage of it to increase the price.The removal of Gaddafi from control of Libya, by France who wanted to silence the illicit financing that the Rais gave to the then president Nikolas Sarkozy, has damaged us not a little.Having exacerbated our dependence on Russia for gas supplies.The weight of the geopolitical factors is also the fact that there is no organization to manage this raw material, such as OPEC for oil, thus wanting to balance the fluctuations deriving from the market and politics.Then pay attention to the value of the dollar: the dollar is the currency with which gas is traded on an international scale.This is why it affects the price trend.So, in summary, there are two risk factors that influence the price of natural gas:Is it worth investing in natural gas?As we will see, the answer lies in the multiple use of natural gas.However, as seen, there are some risk factors related to this raw material.Moreover, not a few.Furthermore, the very choice of the financial instrument you want to use must be carefully examined, an operation that is fundamental and must always be carried out, as making investments in a poke, without knowing the value of the products and the market trend, can be dangerous.Therefore, also for natural gas the rule applies that it is necessary to inform yourself a lot before investing.On all the factors that can influence this raw material.Natural gas is a naturally occurring mixture of hydrocarbons consisting primarily of methane, but commonly includes varying amounts of other higher alkanes and sometimes a small percentage of carbon dioxide, nitrogen, hydrogen sulfide, or helium.It forms when layers of decaying plant and animal matter are exposed to intense heat and pressure beneath the Earth's surface for millions of years.The energy that plants originally got from the sun is stored in the form of chemical bonds in the gas.Natural gas is a fossil fuel used as an energy source for heating, cooking and electricity generation.It is also used as a vehicle fuel and as a chemical feedstock in the production of plastics and other commercially important organic chemicals.Natural gas based on fossil fuels is a non-renewable resource.Natural gas is found in deep underground rock formations or associated with other hydrocarbon deposits in coal beds and as methane clathrates.Oil is another fossil fuel and resource found in close proximity and with natural gas.Most natural gas was created over time by two mechanisms: biogenic and thermogenic.Biogenic gas is produced by methanogenic organisms in swamps, peatlands, landfills and shallow sediments.Deeper into the earth, at higher temperatures and pressures, thermogenic gas is created from buried organic material.In oil production, gas is often burned as flare gas.The World Bank estimates that over 150 cubic kilometers of natural gas are burned or vented each year.Before natural gas can be used as a fuel, most, but not all, must be processed to remove impurities, including water, to meet marketable natural gas specifications.The by-products of this process include: ethane, propane, butane, pentanes and higher molecular weight hydrocarbons, hydrogen sulfide (which can be converted to pure sulfur), carbon dioxide, water vapor, and sometimes helium and nitrogen.Natural gas is often informally referred to simply as "gas", especially when compared to other energy sources such as oil or coal.However, it should not be confused with gasoline, especially in North America, where the term gasoline is often shortened to the colloquial use with gas.Natural gas was accidentally discovered in ancient China as a result of brine drilling.Natural gas was used to boil brine to make salt.Natural gas was first used by the Chinese around 500 BC (possibly as early as 1000 BC).They discovered a way to transport the gas that seeped from the ground into raw bamboo pipes where it was used to boil salt water to extract salt in Sichuan's Ziliujing District.The world's first industrial extraction of natural gas began in Fredonia, New York, USA, in 1825. By 2009, 66,000 km³ (or 8%) of a total of 850,000 km³ of natural gas reserves had been used. remaining estimated.Based on an estimated 2015 world consumption of around 3400 km³ of gas per year, the estimated total of the remaining economically recoverable natural gas reserves would have lasted 250 years at current consumption rates.An annual increase in utilization of 2-3% could lead to currently recoverable reserves that last much shorter, perhaps 80 to 100 years.In the nineteenth century, natural gas was usually obtained as a byproduct of oil production, as the gas's small and light carbon chains exited the solution as the extracted fluids underwent a reduction in pressure from the tank to the surface, similar to uncorking a soft drink the bottle where carbon dioxide flows.Unwanted natural gas was a disposal problem in active oil fields.If there was no market for natural gas near the wellhead it was prohibitive to cost the pipe to the end user.In the nineteenth and early twentieth centuries, unwanted gas was usually burned in oil fields.Today, unwanted gas (or non-recoverable gas with no market) associated with oil extraction is often returned to the reservoir with "injection" wells in anticipation of a possible future market or to repressurize formation, which can improve rates. extraction from other wells.In regions with high demand for natural gas (such as the United States), pipelines are built when it is economically feasible to transport the gas from a wellsite to a final consumer.In addition to the transportation of gas via pipelines for energy production, other end uses for natural gas include exporting as liquefied natural gas (LNG) or converting natural gas into other liquid products through gas to liquids (GTL) technologies. ).GTL technologies can convert natural gas into liquid products such as gasoline, diesel or jet fuel.Several GTL technologies have been developed, including Fischer-Tropsch (FT), gasoline methanol (MTG) and gasoline plus syngas (STG).FT produces a synthetic crude which can be further refined into finished products, while MTG can produce synthetic gasoline from natural gas.STG is capable of producing drop-in gasoline, diesel, jet fuel and aromatic chemicals directly from natural gas through a single cycle process.In 2011, Royal Dutch Shell's 140,000 barrels (22,000 m3) per day FT plant went into operation in Qatar.Natural gas can be "associated" (found in oil fields) or "unassociated" (isolated in natural gas fields) and is also found in coal beds (such as coal methane).It sometimes contains a significant amount of ethane, propane, butane, and pentane-heavy hydrocarbons removed for commercial use before the methane is sold as a fuel for consumption or as a feedstock for chemical plants.Non-hydrocarbons such as carbon dioxide, nitrogen, helium (rarely) and hydrogen sulfide must also be removed before natural gas can be transported.Natural gas extracted from oil wells is called cottage gas (although not actually produced by the ring and through an outlet of the head) or associated gas.The natural gas industry is extracting an increasing amount of gas from challenging resource types: sour gas, tight gas, shale gas, and coal methane.There is some disagreement as to which country has the largest proven gas reserves.Sources that believe Russia has by far the largest proven reserves include the US CIA (47 600 km³), the US Energy Information Administration (47 800 km³), and OPEC (48 700 km³). .However, BP attributes Russia only 32,900 km³, which would put it in second place, slightly behind Iran (from 33 100 to 33 800 km³, depending on the source).With Gazprom, Russia is often the largest natural gas extractor in the world.The main proven resources (in cubic kilometers) are the world 187 300 (2013), Iran 33 600 (2013), Russia 32 900 (2013), Qatar 25 100 (2013), Turkmenistan 17 500 (2013) and the United States 8500 (2013) It is estimated that there are approximately 900 000 km³ of “unconventional” gas such as shale gas, of which 180 000 km³ can be recovered.In turn, many studies from MIT, Black & Veatch and the DOE predict that natural gas will account for a larger share of electricity and heat generation in the future.The largest gas field in the world is the South Pars / North Dome offshore Gas-Condensate field, shared between Iran and Qatar.It is estimated to have 51,000 cubic kilometers (12,000 cu mi) of natural gas and 50 billion barrels (7.9 billion cubic meters) of natural gas condensates.Because natural gas is not a pure product, as tank pressure decreases when unassociated gas is extracted from a field under supercritical conditions (pressure / temperature), higher molecular weight components can partially condense due to isothermal depressurization , an effect called retrograde condensation.The liquid thus formed can become trapped when the pores of the gas tank are exhausted.One method of addressing this problem is to re-inject the condensate-free dried gas to maintain underground pressure and allow for re-evaporation and extraction of condensates.More frequently, the liquid condenses on the surface and one of the tasks of the gas is to collect this condensate.The resulting liquid is called liquid natural gas (NGL) and has commercial value.Before seeing how to invest in natural gas, it is good to keep in mind the many uses that are made of it.From these we will understand why natural gas is also an excellent investment opportunity.Often gases in the wild require the removal of various hydrocarbon molecules contained in the gas.Some of these gases include heptane, pentane, propane and other hydrocarbons with molecular weights higher than methane (CH4).Natural gas transportation lines extend to the natural gas treatment plant or unit that removes the higher molecular weight hydrocarbons to produce natural gas with energy content between 950-1,050 British thermal units per cubic foot (35- 39 MJ / m3).The processed natural gas can therefore be used for residential, commercial and industrial uses.The natural gas flowing in the distribution lines is called medium-flow natural gas and is often used to power the motors that rotate the compressors.These compressors are needed in the transmission line to pressurize and re-pressurize the natural gas mid-flow as the gas travels.Typically, natural gas-powered engines require 950-1,050 BTU / cu ft (35-39 MJ / m3) of natural gas to operate within the rating plate specifications.Several methods are used to remove these higher molecular weight gases for use by the natural gas engine.Some technologies are as follows:Natural gas is a major source of electricity generation through the use of cogeneration, gas turbines and steam turbines.Natural gas is also suitable for combined use in association with renewable energy sources such as wind or solar energy and to power peak load power plants that operate in tandem with hydroelectric plants.Most of the grid's peak power plants and some off-grid engine generators use natural gas.Particularly high efficiencies can be achieved by combining gas turbines with a steam turbine in combined cycle mode.Natural gas burns cleaner than other fuels, such as oil and coal.Since burning natural gas produces both water and carbon dioxide, it produces less carbon dioxide per unit of energy released than coal, which mainly produces carbon dioxide.Burning natural gas produces only about half the carbon dioxide per kilowatt hour (kWh) that coal does.For transportation, the combustion of natural gas produces about 30% less carbon dioxide than the combustion of oil.The US Energy Information Administration reports the following emissions in millions of tons of carbon dioxide worldwide for 2012: Natural Gas: 6,799, Petroleum: 11,695, Coal: 13,787.Internal combustion electricity generation emits around 2,000 pounds (900 kg) of carbon dioxide for every megawatt hour (MWh) generated, which is nearly double the carbon dioxide released by natural gas generation.Due to this increased carbon efficiency in natural gas production, as the fuel mix in the United States changed to reduce coal and increase natural gas production, carbon dioxide emissions unexpectedly decreased.Those measured in the first quarter of 2012 were the lowest of those recorded in the first quarter of each year since 1992.Combined cycle power generation using natural gas is currently the cleanest available energy source using hydrocarbon fuels and this technology is widely and increasingly used as natural gas can be obtained at increasingly reasonable costs.Fuel cell technology could ultimately provide cleaner options for converting natural gas into electricity, but it is not currently price competitive.Locally produced electricity and heat using the combined natural gas-fired CHP and CHP plant are seen as energy efficient and a quick way to reduce carbon emissions.The power generated by natural gas increased from 740 TWh in 1973 to 5140 TWh in 2014, generating 22% of the world's total electricity.About half of that generated with coal.Efforts around the world to reduce coal use have led some regions to switch to natural gas.Natural gas delivered to a residential environment can generate temperatures in excess of 1,100 ° C (2,000 ° F) making it a powerful household fuel for cooking and heating.In much of the developed world it is supplied through pipes to homes, where it is used for many purposes, including cookers and ovens, gas dryers, heating / cooling and central heating.Heaters in homes and other buildings can include boilers, furnaces, and water heaters.Both North America and Europe are the main consumers of natural gas.Household appliances, ovens and boilers use low pressure, usually 6 to 7 inches of water (6 "to 7" toilet), which is approximately 0.25 psig.The pressures in the supply lines vary, either the utilization pressure (UP, the aforementioned 6 "to 7" WC) or the elevated pressure (EP), which can range from 1 psig to 120 psig.Systems using EP have a regulator at the service inlet to reduce the pressure to UP.In the United States, compressed natural as (CNG) is used in rural homes without connections to public utilities, or with portable grills.Natural gas is also supplied by independent natural gas suppliers through Natural Gas Choice programs throughout the United States.However, as CNG costs more than LPG (liquefied petroleum gas), LPG is the main source of rural gas.Natural Gas is a cleaner and cheaper alternative to other automotive fuels such as gasoline (petrol) and diesel.At the end of 2014 there were over 20 million natural gas vehicles worldwide, driven by Iran (3.5 million), China (3.3 million), Pakistan (2.8 million), Argentina (2.5 million), India (1.8 million) and Brazil (1.8 million).Energy efficiency is generally equal to that of gasoline engines, but lower than that of modern diesel engines.Petrol / petrol vehicles converted to run on natural gas suffer from the low compression ratio of their engines, resulting in a power cutout when running on natural gas (10% -15%).CNG-specific engines, however, use a higher compression ratio due to this fuel's higher octane rating of 120-130.In addition to use in road vehicles, CNG can also be used in aircraft.Compressed natural gas has been used in some aircraft such as the Aviat Aircraft Husky 200 CNG and the Chromarat VX-1 KittyHawk is also used in aircraft.For example, Russian aircraft manufacturer Tupolev is conducting a development program for the production of LNG and hydrogen-powered aircraft.The program has been running since the mid-1970s, and seeks to develop LNG and hydrogen variants of the Tu-204 and Tu-334 aircraft, as well as the Tu-330 cargo aircraft.Depending on the current market price of fuel and LNG, fuel for an LNG-powered plane could cost 5,000 rubles (US $ 100) less per tonne, about 60%, with considerable reductions in carbon monoxide emissions. , hydrocarbons and nitrogen oxides.The advantages of liquid methane as a jet engine fuel is that it has a more specific energy than common kerosene blends and that its low temperature can help cool the air that the engine compresses for greater volumetric efficiency, in fact replacing an intercooler.Alternatively, it can be used to lower the exhaust temperature.Natural gas is an important raw material for ammonia production, through the Haber process, for use in fertilizer production.Natural gas can be used to produce hydrogen, with one common method being the hydrogen reformer.Hydrogen has many applications: it is a primary raw material for the chemical industry, a hydrogenating agent, an important raw material for oil refineries and the fuel source in hydrogen vehicles.Protein-rich and fish-rich feeds are produced by feeding natural gas with Methylococcus capsulatus bacteria on a commercial level.Natural gas is also used in the production of textiles, glass, steel, plastics, paint and other products.During extraction, storage, transportation and distribution, natural gas is known to enter the atmosphere, particularly during the extraction process.A 2011 Cornell University study showed that the methane loss rate may be high enough to compromise its global warming advantage over coal.This study was later criticized for its overestimation of methane loss values.Preliminary results of some aircraft withdrawals by the National Oceanic and Atmospheric Administration indicated higher-than-expected methane emissions from gas wells in some areas, but overall results showed methane emissions in line with previous EPA estimates .Natural gas is often described as the cleanest fossil fuel.It produces 25% and 40% less carbon dioxide per delivered joule of oil and coal, respectively, and potentially less polluting than other hydrocarbon fuels.However, in absolute terms, it comprises a substantial percentage of human carbon emissions and this contribution is expected to grow.According to the IPCC Fourth Assessment Report, natural gas produced approximately 5.3 billion tons per year of CO2 emissions in 2004, while coal and oil produced 10.6 and 10.2 billion tons, respectively.According to an updated version of the Special Report on Emissions Scenario by 2030, natural gas would be the source of 11 billion tons per year, with coal and oil now 8.4 and 17.2 billion respectively, as demand is in increase of 1.9% per year.