NG: natural gas and seasonality

NG — the wildest energy contract on the board

NG is the ticker for Henry Hub Natural Gas futures on NYMEX. The contract represents 10,000 MMBtu (million British thermal units) of natural gas, delivered physically at the Henry Hub in Erath, Louisiana — the pipeline crossroads of the US gas network. The tick is small: $0.001 per MMBtu, which works out to $10 per tick. So if the price moves from $3.150 to $3.160, that's ten ticks, or $100 per contract.

Here's what makes NG different from every other energy contract: the volatility. Five-percent daily moves in NG are common. Ten-percent moves happen multiple times a year. A single cold front in the US Midwest can rip the contract higher in a session. A mild winter forecast can crash it just as fast. Realized volatility on NG runs roughly two to three times that of crude oil. That's not a flaw to fix — it's the product. Just respect it when sizing.

Seasonality on NG is the most pronounced in any commodity market. Demand is heaviest in winter — homes heated, gas-fired power plants running flat out during cold snaps. Demand peaks again in summer, when air conditioning load forces utilities to burn more gas for electricity generation. Spring and fall are the 'shoulder' seasons with lighter demand. You can see this seasonality directly on the forward curve: January and February contracts trade at a premium to October and November contracts almost every year. It's not a secret signal — it's the entire structure of the market.

The single most important data point for NG traders is the EIA Weekly Natural Gas Storage Report, released every Thursday at 10:30am ET. It tells the market how much gas was added to (or pulled from) US storage in the prior week. During winter draws, every billion cubic feet matters. A report that comes in even slightly worse than expected can move NG one to three percent in a few seconds. We'll cover EIA inventory dynamics in lesson six.

Recap: NG is Henry Hub natural gas on NYMEX. 10,000 MMBtu per contract, $10 per tick, physically deliverable in Louisiana. Wild volatility, strong winter-and-summer seasonality, Thursday storage reports.