Knowledge Base

Natural Gas PhysBasis -
Buying / Selling Phys Basis

Commodities traders are renowned for moving quickly. Decisions must be made quickly or opportunities will be missed. Natural gas traders, like traders of other commodities, engage in industry short hand to describe complex financial transactions.

"PhysBasis" is a prime example of this short hand. As we've seen, Basis contracts are one of the most common natural gas derivatives in the US natural gas markets. Basis contracts allow parties to exchange the risk associated with basis locations by exchanging a location's price for the price at the Henry Hub. The location's price is defined by an independent third party (primarily S&P Global Platt's in the US). So buying or selling PhysBasis is the buying or selling of physical natural gas in exchange for the index defined in the Basis contract. For example, buying "Katy PhysBasis" would imply buying physical natural gas at a Katy location in exchange for the price defined by the S&P Global Platt's Katy Monthly index settlement for the relevant delivery period.

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