Natural Gas

[winston]

This Commodity Is So Cheap, You Can't Lose Money By Tom Dyson

Commodities have taken a beating – down 60% since last July.

But one commodity has performed worse than any other: natural gas. Since last July, the price of natural gas has fallen 75%, from $13.50 to $3.50. Natural gas is still testing new lows, while most other commodities – including oil – have bounced significantly from their bear-market bottoms late last year.

Natural gas is so cheap right now, it's not economical for drillers to bring it from the ground. Major gas producers, like Chesapeake Energy and Devon Energy, are idling rigs and slashing drilling budgets.

Last summer, when natural gas prices were at $14 per thousand cubic feet (mcf), 1,600 gas rigs in the United States were pumping gas onto the market. As of March 13, only 884 rigs were operating. This means supplies will soon start to shrink.

Meanwhile, low prices are stimulating demand. Last week, AT&T announced it was spending $565 million on 15,000 natural gas-powered vehicles. It'll save millions per year in fuel costs and earn millions in tax credits. Other companies will follow. Taxis and buses will convert next. Then, we'll see 18-wheelers begin to run on gas.

But the big driver of natural gas demand will be the electric industry. The new government is pushing alternative energies like solar, wind, and hydroelectricity and taxing traditional power industries like coal. The more the government funds alternative energy, the more important natural gas becomes to the economy.

The decline in rig counts will soon lead to a shortage of natural gas, and prices will shoot back up again... just like they always do. Seven years ago, for example, producers cut their drilling rig count at a similar pace to today's cuts. Natural gas prices rose 86% the following year.

I expect the rise in gas prices is imminent. Gas prices track oil prices. Oil has risen 43% since Christmas. Gas has to catch up. Also, speculators have bet so heavily against natural gas prices, they're breaking historic records. Right now, speculators have huge positions against the commercials (or the actual fuel users). When speculators are all on the same side of the trade, a violent reversal is near.

Here's the bottom line: When a commodity is unprofitable for producers, you need to invest in it immediately. When a commodity is unprofitable, the industry shrinks, leaving only the most efficient firms in operation. Supply collapses. Prices rise. This is what we're currently seeing in the natural gas business...

The natural gas ETF's symbol is UNG. I think this ETF is about to see a major rise. You could also look toward natural gas drillers to profit off the trend.

Natural gas may not go back to $14 per mcf any time soon... But it's so oversold right now, it would be hard to lose money buying at these prices.

[winston]

Natural gas prices plunged on Thursday to levels last reached in 2002 after an Energy Department report showed that the amount of gas in storage had hit a record high for this time of year.

The sharp price decline of natural gas, to below $3 per thousand cubic feet from a peak of over $13 last summer, has been caused by a drop in demand from factories and homes because of the recession, coupled with a big expansion of domestic production over the last few years.

"It is tough times in the gas business, certainly," said Thomas F. Darden, chief executive of Quicksilver Resources, a major natural gas producer, after the government stockpile report was released. "Prices today are below our costs to produce, so in our view this is not a sustainable scenario."

Gas demand is so weak and supply so abundant that some experts think the country could run out of storage capacity before the winter heating season begins, requiring gas companies to reduce flow from their wells or even shut down production.


– New York Times

[kennynah]

time to buy gas.....

[winston]

Something must be brewing in Natural Gas as well. I'm starting to get alot of articles on Natural Gas in my Inbox, just like Sugar ..

NATURAL GAS IS NOT AT A SEVEN-YEAR LOW... TRY 15 by Brian Hunt, Daily Wealth

Awful headlines for the energy business: The price of natural gas – America's largest source of clean electricity – dipped to a seven-year low last week.

Yes... it's bad news for natural-gas producers. But bad as it is, it's also wrong. You see, when measured in "real money," natural gas is actually trading at a 15-year low.

One of the biggest mistakes the average market participant makes is measuring asset performance without factoring in the declining value of the U.S. dollar. The greenback has lost about 25% of the purchasing power it held in 2002. This makes folks believe they've made a "killing" on their home – when after adjusting for dollar depreciation, they really haven't gained a bit of real wealth. That's why a seasoned investor measures things in terms of "real money," gold. Gold is an objective measure of value that cannot be debased at the whim of politicians.

Our chart today displays natural gas in terms of gold over the past 15 years. As you can see, natural gas is at its lowest point relative to gold since 1995. If you're looking for a "blown-out" commodity, this is it.

[millionairemind]

Something must be brewing in Natural Gas as well. I'm starting to get alot of articles on Natural Gas in my Inbox, just like Sugar ..

You super power trader la... that is Y they send all these articles to you

[winston]

Ha Ha MM, I dont trade futures as I dont like to swim with the sharks ..

Here's another one below ...

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Why nat gas bear Stansberry is getting bullish
By Porter Stansberry in the S&A Digest:

Here's something you don't see very often... The price of natural gas is in freefall and no longer seems tethered to the prices of other energy commodities. At current prices, the ratio between oil and natural gas is 25 to 1. The usual ratio is more like 8 or 10 to 1.

We've been bearish for a long time on natural gas. But maybe it's time to buy gas and sell oil.

[lithium]

Anyone into Natural gas? I have been trading it since June, not making any money yet. I have overlooked the seasonal Fall consumption months. So I cut my losses.

In cash position at the moment, but planning to go back in big time next 2 weeks. Thinking that Oct will be a good month for Natural gas since winter is near.

Comments anyone?

[kennynah]

i have not traded nat gas...but if i wanted to...i would read all about natural gas before i traded this product...

[lithium]

I basically eat sleep work also think about Nat Gas for the past 3 months. So this is my last try. I will quit trading if I can't make money this time.

[b0rderc0llie]

May I know what instrument you are using to trade Natural Gas?