Wt Natural Gas Discussion Threads

[triples] 07/10/2009 17:01

Preppy

You're absolutely right about the time frame.

I think you have caught the bottom and held on for a quick rise north. Congrats. I am not sure there is so much to play for now so Webby may need to be fleet of foot.

Don't look at the chart and think it's going all that way back up... it can't/won't because of the nature of commodity long-only ETFs fighting the contango.

[preppy] 07/10/2009 16:03

Webby - Not sure about the 'don't hold ETF's' message here - depends what your timeframe is. I have held ETF's over the last month or so, and done OK, and I still hold here.

For an Oil/Gas punt, have a look at MRP - lots of stuff to come there - will easily beat any bank deposits!

[frndlyfire] 07/10/2009 08:58

Webby - Chesapeake and XTO (both US listed) would be my two picks.

[webby] 06/10/2009 19:34

Triples or anybody else for that matter. Do you have any suggested buy and holds which are directly linked to gas prices?
Agree an ETF is not a share to be holding.

[triples] 06/10/2009 18:43

kilgallp

This share is not designed for buy & hold, imho

Suggest you read the threads on LNGA and NGAS

[shavian] 06/10/2009 18:05

Wish I had bought those 3000 after all!!

[kilgallp] 06/10/2009 15:18

Well I've just made an initial invetment here. Good luck chaps.

[kickstart] 24/9/2009 11:10

Yes as winter draws nigh we are starting to rock and roll. I have a truck load bought over the last few weeks.

[shavian] 23/9/2009 21:54

Looks like a breakout. Tim Guiness of Global Energy fund fame says he agrees with me.

Funny story. I bought just a few for my SIPP @ 34p, but saw somewhere later that the price of NGSP was posted as £34. Checked this out with the broker and he confirmed 34p. Imagine my surprise when I got an invoice for £102,000 for 3000 shares - oops. Thought about selling this morning at ?35 (quids or pence) but broker cam back in time and admitted their error. End of panic. Will now top up on the dips. Phew - lol

[notanewmember2] 12/9/2009 19:28

I feel a tingle in my trousers, just like this dead dog of gas prices, could be this the long awaited erection~?!!!

[ezodisy] 11/9/2009 12:51

as expected a hard turn around following Labour Day. I would say that that's the bottom in.

[ted32] 09/9/2009 11:37

Sorry! The name is IOFINA (IOF)

[ted32] 09/9/2009 11:31

One way to play natural gas is Ionfina (IOF). They extract iodine from the gas.

[mineyoursnothingdone] 08/9/2009 09:23

Hi Guys. Do you think this fund is the best way to gain exposure to natural gas? After a bit of investigation it seems that the investor is getting a bit shafted by the huge disparity in futures prices as contracts roll - and this is how these funds get their exposure. Is this correct? Any info much appreciated. Apologies if this has been covered earlier in the thread.

[ezodisy] 07/9/2009 10:21

We've had an impulsive sell off on the chart and Friday closed as a hammer. Falling knife lovers might want to take it from here in anticipation of a hard reversal coming out of yank Labor Day.

[nabcom] 06/9/2009 19:52

Canadian Natural Gas Markets: Beginning of the End of the
Price Meltdown - Supply Capitulation

It's here and it will start to make a difference. Large scale
shut-ins of natural gas production in Western Canada are
underway, marking the first deliberate price-driven shutins
of Canadian gas production since the early 1990s.

Where Will It End? Determining the exact point at
which the price plunge and shut-ins will end is difficult to
say. We expect that the drop in prices that has been
underway in the past two weeks will moderate and stop
shortly. It is unlikely to go much higher after the price fall
has been arrested, but will mark the point at which the
market will be relatively balanced



(link posted by m3ggiesdad on iii LNGA thread)

[shavian] 06/9/2009 07:29

Interesting post on Seeking Alpha dated 19 July, but still relevant imho. Sorry I could not reproduce the charts, but follow the link to find the original article.



Whilst many will argue that the fundamentals for natural gas are bad, we would urge readers to note that fundamentals always appear bad at the bottom of a market; conversely, at the top of the market they appear infinitely positive. Of course, in investing the trick is to see through what is and consider what is likely to be. To be honest, we have no idea of where bottom of the market for natural gas is. However, we do know that as of late many of the signs of a bottom formation for natural gas are in place.

Perhaps we are too contrarian for our own boots at times but this is for good reason. Over the years we have learnt (yes the hard way) that "when everyone thinks alike they are most likely to be wrong". Bearish sentiment towards natural gas appears to be at record highs, or if not, certainly at extreme levels. There are a number of reasons why natural gas prices are as low as they are (why else would they be so low?) and now we are beginning to hear how there has been a "fundamental change" in the natural gas market.

Amongst others there are arguments that the natural gas ETF UNG is driving prices (as its cousin USO is driving crude prices), that cheap supplies of LNG are coming to market, and that cheap gas supplies from shale mines are keeping the price of gas low. We don't know what is fact or fiction, but we do know that when we hear the words (albeit words to the effect) "this time it is different" the more likely it is no different than before.

We do know that natural gas stock piles have increased dramatically over the last few months as demand appears to have fallen. However, supply cut backs have been equally dramatic. Natural gas rig numbers have fallen the most in modern history over a rolling 12 month period (a fall of approximately 56%) and there appears to be no let up in the numbers falling over the last few months. From contacts in the oil and gas drilling industry we know that the longer a rig is shut down the time to get it back on stream increases exponentially.

In addition, it is a relatively simple task to shut a rig down but it is a much more difficult task to get it back on stream. We suspect that (as per usual) operators will overdo the supply cut backs and when demand picks up stock piles will fall rapidly because supply will be unable to keep up.



From a technical perspective there has been no change in trend in natural gas futures. However, note from the chart below how the rate of change (ROC) has begun to diverge from the price of natural gas itself.

We have seen this behaviour occur time and time again in the commodities market and generally (80% of the time) it signals that the end of the trend is very near. Also note the increase in volatility over the last couple of months. Changes in trend are generally preceded by a material increase in volatility.



How long can crude oil and natural gas prices diverge in an absolute sense? Something has got to give, either crude oil prices have to fall to meet natural gas prices or natural gas prices have to rise more dramatically than crude.

Our call is that commodity prices in general have entered a bull market (click here for our discussion on the commodities market) and accordingly crude oil prices are more likely to rise over the coming weeks/months than fall. So we think that it will be the natural gas bears that give. What would be a fair price for natural gas?

We don't know but if history is anything to go by, it appears that natural gas is trading at a comfortable 50% discount to crude.



We don't like following the herd. Technical junkies are probably watching the $4.50 level in natural gas futures for confirmation of a breakout. We have seen enough evidence that the next move of significance is likely to be to the upside. We are positioning ourselves accordingly. It may take a few months to play out, and we may be wrong before we are right. But we can afford to wait – good things take time!

Disclosure: Long DBC, UNG, Short USO

[shavian] 05/9/2009 08:25

Good find P Bear! I found this bit particularly interesting:

"In terms of natural gas, granted there is a glut, but natural gas prices typically trade around less than 13 times the differential of crude oil. Right now we're trading at around 23 times. Historically speaking, when that differential is greater than 13, the price of natural gas can skyrocket within six months. In 2003 the U.S. was thought to have plentiful natural gas resources, but the price of gas more than doubled within a year. It's my belief that lightning is going to strike twice.

TER: You say the ratio should settle at about 13. What's to say that crude won't be going down rather than natural gas going up?

JL: I don't think crude is going to come down. This is my own theory. Crude has a limited downside. Honestly, I also think that the price of the dollar is going to be very instrumental in this. The Fed won't be touching interest rates domestically for the rest of the year, which will be a catalyst for the Euro to potentially trade to $1.50 by year end. If that's the case, crude oil's going a lot higher. Also as mentioned earlier, we think the Japanese yen is about to strengthen vs. the USD and crude is priced in dollars so that would be supportive of crude oil.

TER: Aside from the historical patterns, what makes you think natural gas prices will increase closer to the ratio?

JL: I've been on plenty of conference calls with natural gas companies in the last few weeks and everyone keeps saying the same thing: the rig count has bottomed and prices will show a dramatic difference to the upside by the end of the year. Natural gas is cleaner than both crude oil and coal and it could potentially be used as an automotive fuel in the future. You can't tell me that the global economy is in recovery mode and crude is at 10-month highs, copper at 11-month highs and natural gas, which is used mainly for industrial purposes, is at 7-year lows. I believe investors have been spooked by upcoming CFTC position limits and much uncertainty regarding the viability of the UNG ETF to play natural gas and this has credited an amazing long opportunity in natural gas. To think that some hedge funds have not been blown up with natural gas below $3 seems foolish-this may have caused further selling pressure that could soon be reversed in a big way.

TER: Some analysts say that with so many incredible finds and such vast improvements in production technology, we'll really have more natural gas than we need. Wouldn't that tilt the supply-demand balance to the point of keeping natural gas prices lower?

JL: I agree that there have been some exceptional finds, not only in the Gulf of Mexico, but in Haynesville and Marcellus and Bakken as well. That said, it will take years for that natural gas to come to the marketplace. So yes, we might have a lot in the ground, but I don't think it's going to come out for a very long time.

There are other factors to consider as well. The fear that the U.S. is going to import more liquefied natural gas has definitely hurt the price of natural gas. I think that fear is exaggerated and that LNG will be shipped more to Europe than to the U.S. If that's the case, there's one major overhang that's going to disappear. This LNG factor has been a major reason why natural gas has been weighed down and we're trading below $4. If that factor goes away and people realize that these major finds of natural gas are still many years away from the marketplace, that's going to be a major boost in natural gas prices. And don't forget that many exploration and production companies have cut budgets back and pushed projects back, not only to 2010, but even to 2012. "

Time start accumulating GAS imho. I'm with ted32 on this.

[ted32] 04/9/2009 12:17

IT can only be a matter of time before drilling comes to a standstill. I'm tempted to average down.

[drakioned] 04/9/2009 12:00

Seriously.. what the hell is going on with this?

[nabcom] 03/9/2009 21:52

Stockpiling hits natural gas
By Gregory Meyer in New York and Javier Blas in London

Published: September 3 2009 11:29 | Last updated: September 3 2009 20:47

US natural gas dropped to a fresh 7½-year low on Thursday as injections into burgeoning storage facilities continued, while prices in the UK and continental Europe also fell sharply.

Natural gas for October delivery at Henry Hub, the US pipeline node, fell 7.6 per cent to $2.508 per million British thermal units, earlier touching $2.500, the weakest since March 2002.

The market plunged after a weekly government report on gas inventories. Producers put 65bn cubic feet into underground storage last week, making stockpiles 17.8 per cent higher than the five-year average.

Analysts say storage facilities could be full for the first time this autumn, before heating needs start drawing them down. The prospect of plentiful supplies also pummelled winter gas prices, with the February 2010 gas contract below $5 per mBtu for the first time in five years.

"We're all concerned this is kind of a new chapter in US gas. We haven't reached these infrastructure constraints before," said Teri Viswanath, Houston-based director of commodities research at Credit Suisse.



------

No floor in sight for natural gas; prices plunge

By CHRIS KAHN (AP) – 4 hours ago

NEW YORK - Natural gas prices tumbled again Thursday, hitting new seven-year lows after the government reported more supplies were put into storage as the entire country pares down on energy usage.