Gas Traders Go After M-U’s Local Hubs for Higher Returns

The greater the risk, the greater the reward. You’ve heard that bromide multiple times in your life. And for good reason–it’s true. Our entire stock and financial markets are based on that truism. Gas traders, those who trade futures contracts for natural gas, are like any other traders–they big price swings. It is when the price of the underlying commodity swings that (i.e. when risk rises) that traders make the most money. Don’t know if you’ve noticed, but the price of natural gas hasn’t really swung much at all over the past few years–at least at the Henry Hub, which is where most contracts are pegged. Why? We have a “glut” of natural gas. As soon as the price creeps up a bit, more gas floods the market. But as we’ve written many times in the past, there isn’t just “one price” when it comes to natural gas. There are hundreds of prices–gas is traded at hundreds of different trading points along major pipelines across North America. While the price of gas is steady and doesn’t change much (i.e. no real opportunity to profit from risk) at Henry Hub, such is not the case at all trading hubs. Particularly in the Marcellus/Utica. In our region, prices have been much lower than the Henry Hub–and much more volatile. Wider swings up and down. Now that Rover is flowing, prices are going up in some areas of our region. Other pipelines have a similar effect. So gas traders are beginning to leave contracts pegged to Henry Hub behind and trying their hand at contracts pegged at other trading hubs–some in our region, some in other regions. Bloomberg gives us the low down on a trend that has the power to affect the price of natural gas across the country–particularly in our region…

Please Login to view this content. (Not a member? Join Today!)
You do not have permission to view the comments.

Please Login to post a comment