Natural gas futures prices have risen almost 80-percent from their lows in March, with much of the gain occurring over the past month. Based on my analysis of the Commitments of Traders (COT) reports, issued by the Commodity Futures Trading Commission (CFTC), the vast majority of the buying that propelled prices came from short speculators who covered (bought) to limit further losses. Since early March, they had purchased more than 100,000 futures and options contracts (see graph below). Continue reading "Natural Gas Prices Surging With Dog Days Of Summer Ahead"→
Once heralded as the bridge to an oil-free energy future, natural gas seems to have been relegated to stepchild status in the hierarchy of carbon fuels. Why?
It's cheap, clean, efficient and plentiful. That's part of the problem. The Energy Information Administration (EIA), estimate that there are 388.8 trillion (yes… trillion) cubic feet of proven natural gas reserves in the United States. That's a lot of product to be pumped along with the 20+ trillion cubic feet of dry natural gas we pump annually.
And we keep discovering more. Take a peek at a 20-year study of the spot price.
After a couple of flirts with ridiculous prices, we're pretty much back to where we started when I still had hair and wore size 32 jeans.
The other challenge is lack of industry consolidation. The top 10 U.S. natural gas producers control 31% of the market. That's a decent number. But compare that to the top 10 petroleum producers who tap 52% of the market. Thin margins due to low prices don't get companies excited about acquisitions.
The surge in natural gas production has changed the energy landscape in the United States. Production jumped 44% between 2005 and 2014 compared to a decline of 4.5% over the previous nine-year period.
Prices for natural gas at the Henry Hub in Louisiana jumped 162% between 2002 and 2008 on lower production and an economic boom in emerging markets. By 2012, prices had fallen nearly 70% to $2.75 per million BTU. Beyond a few spikes on colder weather, prices have flatlined between $2.50 and $3.50 for the past two and a half years.
Futures prices on the Chicago Mercantile Exchange (CME) suggest traders are not expecting much to change this year, with the December contract priced at $3.17. But two catalysts may prove speculators wrong and spark a rally in natural gas prices. Traders who get positioned now stand to make up to 50% profits without ever touching a futures contract. Continue reading "A Small Bet On Natural Gas Could Make Traders Big Profits"→
Over the years, I've been successful trading weather patterns as they relate to commodities such as crude oil, gasoline and grains. As unpredictable as the weather can seem, there are patterns, and traders who get ahead of the crowd can exploit them for reliable profits.
Today, I'm going to share one of my favorite seasonal trades with you, and that is the tendency for natural gas prices to rise in the winter months as the colder weather spurs demand for use in home heating.