Against the backdrop of the current geopolitical situation, prices for natural resources have been mostly rising in recent months, interspersed with temporary pullbacks. We are witnessing a full growth cycle in natural resources. This fact makes oil and natural gas futures an attractive resource for investment. You can invest in this sector through futures.
One of the most liquid contracts is for Brent oil. The contracts are monthly. It is possible to trade in futures with different expirations. Your choice depends on the trading strategy and the investment horizon. If the contract is executed before the oil reaches the target, you can roll the position (roll over to the next one). In this case, demand for oil trades is rapidly growing.
Now let’s explain how you can make money on investments. So, one futures contract has 10 lots (barrels). That means that at around $100 a barrel you can hold a position worth almost $1,000. The collateral for each contract is subject to change. This gives you the opportunity to earn with each change in oil by 1%.
An important nuance to keep in mind when buying or selling oil futures now: the differences between different exchanges can sometimes be severe. This, on the one hand, increases the risks, while on the other it creates opportunities for arbitrage.
Natural gas futures prices: earning features
How to buy natural gas futures? On any exchange website you can always see how many positions are open for each contract, divided by individuals and legal entities. Right now, retail investors are inclined to take short positions. Legal entities and professional participants are mainly in a long position with the ratio of about 6 to 1. As with oil, hedging transactions not directly related to the outlook for gas itself may play an important role here.
Gas generally follows the main U.S. Henry Hub benchmark (prices at the Louisiana distribution hub). When investing in gas, as the very idea of a commodity rally, it is worth bearing in mind that the futures under the ticker NG are the US benchmark. Prices in Europe are formed mainly in the Dutch TTF; they are often higher, and they have their own dynamics, unrelated to the Henry Hub.
When information appears that a thousand cubic meters of gas costs $1,500, you know it’s Europe. Look at the natural gas futures charts. And in the U.S., the cost of coal is many times lower. This has nothing to do with the futures we are trading.
Natural gas futures quote: Conclusion
Buying or selling futures can be seen as an alternative to short-term investments in oil and gas stocks. The most liquid are Brent crude oil futures. Players can build arbitrage strategies or bet on the rise and fall scenarios of the raw materials.
Natural gas futures prices are less liquid, but even there you can see a fairly rhythmic movement of quotations against the background of the constantly changing news agenda. As with oil, natural gas futures allow you to invest with actual leverage.