How to Invest in Natural Gas

Natural gas is a gas that consists primarily of methane and is an important fuel source around the world. Natural gas is generally created using one of two mechanisms: biogenic and thermogenic. Biogenic is created by methanogenic lifeforms that exist in shallow waters or landfills while further down in the earth thermogenic gas is created from organic material that has been buried for a great deal of time.

Natural gas is a major source of power generation, especially for heating and cooling systems in the U.S. Generally, the product is used to either power gas turbines or burned to create steam and power steam turbines instead. The fuel is often preferred to coal or oil since it is far cleaner and produces less greenhouse gases than its other fossil fuel cousins.

Furthermore, since the fuel has a very low density, piping the fuel across oceans or in cargo ships is impractical ensuring that gas demand is a very localized business. However, natural gas has seen some developments in this respect in the last few years thanks to the advent of Compressed Natural Gas or CNG. This fuel is generally considered \'greener\' than gasoline and since it is very abundant in major gasoline consuming markets such as the U.S. some have called for increased reliance on the fuel for transportation.


For those looking to invest directly in natural gas, there is a large number of options in the market place. While physical exposure is not possible, investors can buy very liquid futures contracts for the fuel. Additionally, there are a number of stocks as well as an ETF that allow investors to buy up companies that are engaged in some aspect of natural gas production. Lastly, investors can also purchase any number of ETPs that invest in natural gas futures, either exclusively or in a broad energy basket.

Ways To Invest In Natural Gas

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