How to Trade Natural Gas in 2025

Discover effective strategies and insights for trading natural gas in a rapidly evolving energy market.

By Fortrade

Edited by Danéll Theron

Published November 20, 2024.

screen showing natural gas prices and prices

In this article

Main Factors Influencing Natural Gas Prices in 2025

Biggest Producers and Consumers of Natural Gas in 2025

Trading Natural Gas: Common Options in 2025

4 Trading Strategies for Natural Gas

As of July 2024, the natural gas market is characterized by a complex interplay of supply and demand dynamics, with a current price of $2.07/MMBtu. Global supply has been influenced by geopolitical tensions, particularly in Europe and the Middle East, leading to occasional supply disruptions. On the demand side, extreme weather patterns and economic recovery efforts have driven up consumption. 
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Note: Fortrade offers the ability to trade the price changes of instruments with CFDs and NOT to buy/sell ownership of the instrument itself. All the information in this blog is purely educational and should not be considered as advice.
Main Factors Influencing Natural Gas Prices in 2025Geopolitical TensionsConflicts in major gas-producing areas may disrupt the supply, potentially causing price hikes. Political instability in the Middle East or Ukraine could potentially impact global gas prices. These disruptions often cause sudden supply shortages, increasing volatility in the market as traders respond to potential risks and uncertainties.
The image below illustrates how natural gas futures rose from $4.94 to just over $10 in a matter of four months during the Russian invasion of Ukraine.
 
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» Discover how geopolitical events influence financial markets﻿
Weather PatternsExtreme weather conditions (such as cold winters or hot summers) increase demand for heating or cooling, thereby influencing prices. Harsh winters could potentially increase the demand for heating, resulting in higher natural gas consumption and elevated prices.
Economic GrowthEconomic recovery boosts industrial demand for natural gas, which impacts prices. Strong economic performance in major economies typically correlates with higher energy consumption.
As industries increase production, the need for natural gas as a primary energy source rises, driving prices upward. Conversely, economic slowdowns could reduce industrial activity, leading to lower demand and potentially lower prices.
Renewable Energy PoliciesGovernment policies promoting renewable energy could reduce the demand for natural gas, affecting its market dynamics. As countries invest more in renewable sources like wind and solar, reliance on natural gas may decrease, leading to reduced demand and potentially lower prices. However, during the transition period, natural gas might still play a crucial role as a backup energy source.
Biggest Producers and Consumers of Natural Gas in 2025Producers
 United States: The United States remains a leading producer of natural gas, with significant contributions from shale gas production. The U.S. produces approximately 32 trillion cubic feet annually, holding a notable position in global output.
 Russia: Russia is another major natural gas producer, with extensive reserves and export capacity to Europe and Asia. Its annual output is around 23 trillion cubic feet, contributing substantially to global supply.
 Iran: Iran ranks as the third-largest producer, with an annual output of about 9 trillion cubic feet. Its reserves play a crucial role in meeting regional and international energy needs.
Consumers
 United States: The U.S. is also the largest consumer of natural gas globally, accounting for 21.7% of total consumption. It uses approximately 27.2 trillion cubic feet annually, primarily for electricity generation, heating, and industrial processes.
 Russia: Russia consumes about 16 trillion cubic feet annually, making up 12.4% of global consumption. Natural gas is integral to its domestic heating, electricity generation, and industrial sectors.
 China: China consumes nearly twice as much as it produces, with annual usage of approximately 8.4 trillion cubic feet, or 6.4% of global consumption. Industrialization and cleaner energy transitions drive its growing demand.
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 Trading Natural Gas: Common Options in 2025Natural gas is a widely traded commodity with several instruments available for trading. Below is an overview of the most common options, including their strengths, weaknesses, and peak trading hours.
 1. Futures Contracts﻿Futures contracts are standardized agreements to buy or sell natural gas at a specific price on a future date. These contracts are typically traded on exchanges like the New York Mercantile Exchange (NYMEX).
Natural gas futures are primarily traded during NYMEX trading hours, 9:00 AM to 2:30 PM EST when liquidity and volatility are generally highest.
Potential Strengths
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 High leverage enables traders to control large positions with a small initial margin.
 Widely traded, providing liquidity and price transparency.
 Standardized and regulated, which offers protections for traders.
Potential Weaknesses
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 High risk due to leverage, which could magnify potential losses.
 Requires substantial capital, making it less accessible to some traders.
 Can be complex to understand, especially for those new to derivatives.
» Compare CFDs to futures﻿
 2. ETFs (Exchange-Traded Funds)﻿ETFs tracking natural gas prices allow traders to gain exposure to the commodity without directly engaging in futures contracts.
ETFs are traded during stock market hours, typically 9:30 AM to 4:00 PM EST.
Potential Strengths
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 Less risky compared to futures contracts, as they don’t involve margin calls.
 Diversified exposure, as ETFs provide access to a range of natural gas-related instruments, reducing risk.
 Ease of trading. Can be bought and sold like stocks, providing high liquidity.
 Generally have lower management fees compared to directly trading futures.
Potential Weaknesses
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 Management fees can erode returns over time.
 Less leverage, potentially leading to lower returns.
 Tracking errors, as ETFs might not perfectly track the price of natural gas, leading to discrepancies.
» Learn more: Advanced ETF trading strategies and CFDs vs. ETFs﻿
 3. CFDs (Contracts for Difference)Trading hours depend on the brokerage and the underlying markets but generally align with the market hours of the underlying instruments.
Potential Strengths
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 ﻿High leverage allows traders to control large positions with a relatively small amount of capital.
 Margin trading, where only a fraction of the trade's total value is needed to open a position.
Access to global markets
Potential Weaknesses
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 Higher risk, as leverage may lead to significant losses.
 Availability, as CFDs are restricted in some regions due to regulatory constraints.
» Improve your CFD trades with CFD technical analysis﻿
4 Trading Strategies for Natural GasTrading strategies are essential tools for traders looking to make informed decisions in volatile markets. By understanding and applying various strategies, traders could manage risk better and identify potential possibilities.
1. Swing TradingSwing trading is a strategy that involves holding positions for several days to weeks, aiming to capture potential profit from price fluctuations.
Key features:
 Potential risks: Risks include exposure to overnight and weekend market moves, which could cause potential price changes. Incorrect analysis or failure to identify trend reversals could result in significant potential losses. Traders should also be aware of sudden geopolitical events that may disrupt price movements.
 When to avoid: Swing trading is less effective during periods of extreme volatility or geopolitical instability, which could lead to rapid and unpredictable price swings.
» Discover the risks of volatility trading﻿
2. Day TradingDay trading is a trading strategy that involves buying and selling financial instruments within the same trading day. 
Key features:
 Potential risks: The potential risks include high transaction costs due to frequent trading, the potential for significant financial losses from rapid price movements, and the intense time commitment required.
 When to avoid: Day trading is less effective during periods of low liquidity, which could lead to wider spreads and slippage, reducing potential returns.
» Explore these forex day trading strategies﻿
3. ScalpingScalping is a strategy that involves making numerous small trades throughout the day to capture potential profit from minor price fluctuations.
Key features:
 Potential risks: The potential risks include high transaction costs due to frequent trading and the potential for quick losses if the market moves against the trader.
 When to avoid: Scalping is less effective during periods of high volatility, where price movements could become too unpredictable for short-term strategies.
4. Trend FollowingTrend following is a trading strategy that involves identifying and trading in the direction of established market trends. Traders typically hold positions for an extended period, aiming to capture long-term price movements.
Key features:
 Potential risks: The main risks include the potential for trend reversals that could lead to potential losses if not quickly identified. Additionally, markets could enter periods of consolidation, making it challenging to identify clear trends.
 When to avoid: Trend following is less effective during highly volatile or range-bound markets, where trends are short-lived and difficult to distinguish.
Navigating the Future of Natural GasSustainability trends and the shift towards renewable energy are likely to reduce long-term demand for natural gas. As investments in renewable energy sources like wind, solar, and battery storage increase, natural gas may play a diminishing role. However, during this transition period, natural gas is expected to remain crucial as a backup energy source due to its reliability and existing infrastructure. This balance might gradually shift as renewable technologies become more efficient and cost-effective.
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