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Investing in Natural Gas: What to Consider?
One of the most important natural resources in existence is natural gas. Over the last several decades, natural gas (sometimes written as NATGAS in financial data) has become very popular with investors from all walks of life. The three countries with the most natural gas are Russia, Iran, and Qatar. It is important to note that all three of these countries are susceptible to political and geopolitical events.
Yet despite this uncertainty, natural gas has become a hot commodity. The insatiable appetite for gas from all over the world ensures ongoing demand in the future. While many investors hungrily eye gold and oil as their commodities of choice, natural gas has been inching towards the top in recent years. It is recommended to read more and decide if investing in natural gas is right for you.
WHO SHOULD INCLUDE NATURAL GAS IN THEIR PORTFOLIO?
Commodity investors: Those who already have some experience and understanding of commodities, can naturally expand into natural gas. This is due to some overlapping trends that influence both oil and natural gas. While this is not a guarantee for success, it could go a long way.
Day traders: Natural gas is ideal for day traders who are looking to capitalise on market movements. Natural gas can be traded on eToro, allowing traders to take advantage of investment opportunities on their computer or mobile device.
Opportunity hunters: Those constantly searching to take advantage of new markets and opportunities, should consider natural gas as a viable alternative. Natural gas is considered to be extremely volatile.
Diversifiers: For those who are looking to expand into natural gas in order to diversify their portfolio. Many traders believe however, that natural gas should not be lumped in with other commodities, such as gold which tends to be more stable and is considered a safe haven.
WHAT DRIVES NATURAL GAS PRICES?
One of the major positives of trading natural gas is that most of the economic influences are easy to understand and involve common sense. Simply watching the news and going online can often provide traders with all of the information they need.
Weather: One of the biggest factors is the weather. Temperatures that require heating or cooling will increase demand, which in turn drives up prices. In theory, prices of natural gas can rise in July and August, then drop in September and October. While this is not always the case, it’s something to take into consideration.
Economic policy: Policy dictated by governments can have staggering effects on natural gas. Taxes, fiscal and monetary decisions and a host of other economic factors can often cause major ripples in the natural gas market.
Market conditions: The strength of the market can also impact natural gas prices. A declining economy can reduce demand. For example: Less office space in use reduces the amount of heating required in the winter.
NATURAL GAS: ESSENTIAL FOR OUR SURVIVAL
One of the reasons many investors are keen on natural gas is because it has infiltrated our everyday lives to such an extent, that we couldn’t survive without it. Families use natural gas to cook, electric companies use natural gas to provide electricity, it is a primary component of creating animal feed and now even powers public transportation in some major urban centers.
While our dependence on natural gas is not a clear indicator of rising prices. (To the contrary, natural gas prices can be quite volatile at times.) Consumption will likely increase in the coming years, both because of an increased standard of living and consumption in the West and emerging markets in the East. Natural gas is here to stay.
HISTORY OF NATURAL GAS
Despite being millions of years old, natural gas was first used in Britain in 1785. Until the 20th century, gas was primarily used as a source of energy for lamps, due to the lack of mass transportation capabilities. But all of this changed in the 1920s when the United States began to construct major pipelines for natural gas transportation. Up until then, other forms of energy were more feasible. But once transportation became possible, natural gas became far more prevalent and important in the lives of many people. Natural gas was now able to directly reach the homes of families, changing their lives forever.
CONCLUSION: NATURAL GAS IS HERE TO STAY
While there is no guarantee, we can be fairly certain that natural gas will be here to stay for decades to come. While still not as popular as more traditional financial assets, it is gaining traction among both advanced traders and those starting to invest for the first time.
*This content is for information and educational purposes only and should not be considered investment advice or an investment recommendation.
*Past performance is not an indication of future results. All trading carries risk. Only risk capital you’re prepared to lose.
This instrument is available for trading on the eToro Platform.