What is Natural Gas?
Natural gas is classed as a fossil fuel which is commonly used for heating, cooking and electricity generation. Natural gas can also be used to fuel vehicles, in the process of manufacturing plastics and other important organic chemicals.
Uses of Natural Gas
Natural gas is a fossil fuel and is used as a source of energy for:
- Electricity generation
- Fuel for vehicles
- Natural Gas is also used as a chemical feedstock in the construction of plastics and organic chemicals.
- Natural Gas isn’t a non-renewable resource.
Risks of Natural Gas
Like any futures contract, there is always the possibility that the underlying asset i.e. Natural Gas will move in the opposite direction to which you hold your contract. For example: you have taken a long position (expecting the price of Natural Gas to rise), if this were to happen and the Natural Gas fell in price, your long position in Natural Gas will decrease in value.
With any commodity, supply and demand will affect the price dramatically if there is a change. This risk is one that should be monitored on a regular basis and adjusted to suit your risk parameters.
Mining of Natural Gas has an inherent risk with the level of costs associated with extracting the product from the earth. This can include, but not limited to the cost of oil to fuel machinery, cost of labour or new tax regulations being implemented.