Natural Gas is one of the metal commodities that has been traded through MCX. MCX stands for the Multi Commodity Exchange. MCX is the exchange where you can trade commodities such as gold, silver, nickel and agricultural products like cotton, coffee, turmeric, etc. just like the BSE exchange where stocks of companies are traded. The trading mechanism done through MCX is pretty transparent, and it is disciplined with the regulatory framework.
Natural gas is a crucial component of the world's energy supply. It is one of the safest, cleanest and most useful of all energy resources. Natural gas is notably a remarkable resource in the world energy mix, as it has a low carbon emission than other fossil fuels.
As early as around 500 BC, the Chinese discovered the potential of natural gas flowing through the earth's surface. They used natural gas to make the seawater drinkable by boiling and separating the salt.
About 1785, Britain was the first country to market the use of natural gas; which was produced from coal was used to light the houses as well as streetlights.
Without any effective transportation method, the natural gas found before World War II was allowed to sit, vent into the atmosphere, or burnt. Once the transportation of natural gas made possible, new applications were discovered. The claims were such as water heaters, heating homes, operating appliances, ovens and cooktops. The Natural Gas was also used in boilers to generate electricity.
The industry began to use natural gas in manufacturing and processing plants, in boilers used to generating electricity.
Given the volatility in international natural gas prices, risk management techniques are of utmost importance for stakeholders of this commodity, particularly its users. Amidst uncertainty, modern techniques and strategies, including market-based risk management financial instruments like 'Natural Gas Futures', offered on the MCX platform can improve efficiencies and consolidate competitiveness through price risk management.
Reasons for trading Natural Gas Price:
Natural gas is much more environmental-friendly fuel than compared to petroleum or coal. It produces fewer carbon emissions as it burns cleaner. Besides, it is lighter than air, so in case of a leak, it will evaporate, which gives it a safety benefit over gasoline.
Trading in natural gas, along with other commodities, is a smart way to expand an investment portfolio.
As transportation of natural gas grows more affordable and efficient, the global demand for the commodity could rise.
Factors Influencing the MCX Natural Gas Market Price:
International inventory data of Natural Gas. The supplies of natural gas stored in underground facilities can influence prices, notably during periods of high demand.
Natural gas always has a silent battle with other sources of power, including wind, coal, solar, and hydroelectric power. So, for instance, coal often competes actively with natural gas on price.
Strong economic growth generally corresponds with higher natural gas prices.
When the price of crude oil is increased, it impacts the natural gas market.
Before trading in Natural gas, it's better to know the Contract Specification of Natural Gas:
Contract Start Day: As per the Contract Launch Calendar.
Last Trading Day: As per the Contract Launch Calendar.
Contract Duration Maximum of 3 months, at any point of time 3 calendar months will be available for trading.
Trading Period: Mondays through Friday
Trading Session: Monday to Friday: From 9.00 a.m. to 11.30 p.m. / 11.55 p.m*
Trading Unit: 1250 mmBtu
Quotation/ Base Value: Rs.per mmBtu
Price Quote: Ex-Warehouse at Chennai district in Tamil Nadu (excludes only GST).
Maximum Order Size: 20,000mmBtu
Tick Size (Minimum Price Movement): 10 Paise
Daily Price Limits Normally, the base price limit will be 4%. Whenever there is a breach in the base daily price limit, the relaxation will be allowed to 6%.In case, if the 6% base price limit the daily price limit will be relaxed up to 9% after a cooling-off period of 15 minutes.
Extreme Loss Margin: 1%
For individual clients: 60,00,000 mmBtu or 5% of the market-wide open position, whichever is higher for all Natural Gas contracts combined.
Collectively for all clients: 6,00,00,000 mmBtu MT or 20% of the market-wide open position, considerably whichever is higher for all Natural Gas contracts combined.
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