Gas futures: trading may begin soon
The author describes how commodity futures trading operates, then reviews the applications of crude oil futures to producers and royalty owners. Hedging is the mechanism for risk management and balancing price risk exposure that allows the producer to lock in prices at a known level. The basis risk is the difference between the futures price and the cash price, which will vary with location, transportation costs, quality, and delivery time, the basis tends to be more stable than the cash price. Although 98% of all future contracts traded on the exchange are liquidated before maturity, a significant volume of crude oil and refined products is delivered through the exchange. Because futures prices are based on cash commitments, they are treated as reliable cash market indicators and cited by some as a price basis in longer term contracts. Now that natural gas is a commodity, approval of a futures market may help the industry operate more efficiently and effectively.
- OSTI ID:
- 5069065
- Journal Information:
- TIPRO Rep.; (United States), Journal Name: TIPRO Rep.; (United States) Vol. 37:3; ISSN TIRED
- Country of Publication:
- United States
- Language:
- English
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Related Subjects
020700* -- Petroleum-- Economics
Industrial
& Business Aspects
03 NATURAL GAS
030600 -- Natural Gas-- Economic
Industrial
& Business Aspects
29 ENERGY PLANNING, POLICY, AND ECONOMY
294000 -- Energy Planning & Policy-- Fossil Fuels
CONTRACTS
ENERGY SOURCES
FLUIDS
FOSSIL FUELS
FUEL GAS
FUELS
GAS FUELS
GASES
MARKET
NATURAL GAS
PETROLEUM
PRICES
SPOT MARKET
TRADE