The Role of the Speculator Since the advent of gas futures trading in 1990, speculators have come to play a significant role in influencing gas prices. The goal of the speculator in the market is to turn a profit by anticipating price moves. Although speculators do not hold physical gas, their contribution to the paper market consists of liquidity, volume, and volatility.
Most speculators are in the market for only short time periods.
They employ technical analysis techniques to spot price moves and turning points early. While hedging in the energy industry is the source of fierce theoretical debate, the long and short positions of the commercial hedgers who actually buy and sell futures contracts seldom match up. Thus, speculators provide the incremental liquidity needed for futures markets to operate smoothly and efficiently. In effect, speculators create an additional market and assume the price risk that the commercial hedgers attempt to avoid. On balance, speculators in natural gas markets have generally preferred to purchase contracts with expectations that prices will increase, rather than selling short, anticipating that prices will decline.