NatGas Inventory–Price Impact Model
// STORAGE ARBITRAGE ENGINE · BACK-OF-ENVELOPEMarket Parameters
Trader's Action
Core Equations
// Price-inventory function
P(I) = P₀ · (I₀/I)^ε
// Post-injection spot price
P_new = P₀ · (I₀/(I₀+ΔI))^ε
// Price impact (depression)
ΔP = P_new − P₀ < 0
// Storage utilisation
util = (I₀+ΔI)/I_max
// Arbitrage profit (per MMBtu)
π/MMBtu = F_T − P_new − c
// Total profit on ΔI
Π = π/MMBtu · ΔI·10⁹
New Spot Price
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$/MMBtu
Price Impact ΔP
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$/MMBtu
Storage Used
--
% of capacity
Arb Spread
--
$/MMBtu net
Spot Price vs. Inventory Level
Price Impact vs. Injection Size
Arbitrage Mechanism — Step by Step
STEP 01 · BUY FUTURES
Enter long position in natural gas futures at current futures price F_T. Lock in the sell price before injecting gas.
STEP 02 · INJECT GAS
Purchase ΔI Bcf at prevailing spot P₀, inject into storage. Spot price falls to P_new as supply increases.
STEP 03 · WITHDRAW & DELIVER
Withdraw gas and deliver against the futures contract at F_T. Deduct storage holding costs c.
Total Arbitrage Profit on ΔI
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