• 1 hour Gazprom Neft Unhappy With OPEC-Russia Production Cut Deal
  • 3 hours Disputed Venezuelan Vote Could Lead To More Sanctions, Clashes
  • 5 hours EU Urges U.S. Congress To Protect Iran Nuclear Deal
  • 7 hours Oil Rig Explosion In Louisiana Leaves 7 Injured, 1 Still Missing
  • 7 hours Aramco Says No Plans To Shelve IPO
  • 3 days Trump Passes Iran Nuclear Deal Back to Congress
  • 3 days Texas Shutters More Coal-Fired Plants
  • 3 days Oil Trading Firm Expects Unprecedented U.S. Crude Exports
  • 3 days UK’s FCA Met With Aramco Prior To Proposing Listing Rule Change
  • 3 days Chevron Quits Australian Deepwater Oil Exploration
  • 4 days Europe Braces For End Of Iran Nuclear Deal
  • 4 days Renewable Energy Startup Powering Native American Protest Camp
  • 4 days Husky Energy Set To Restart Pipeline
  • 4 days Russia, Morocco Sign String Of Energy And Military Deals
  • 4 days Norway Looks To Cut Some Of Its Generous Tax Breaks For EVs
  • 4 days China Set To Continue Crude Oil Buying Spree, IEA Says
  • 4 days India Needs Help To Boost Oil Production
  • 4 days Shell Buys One Of Europe’s Largest EV Charging Networks
  • 4 days Oil Throwback: BP Is Bringing Back The Amoco Brand
  • 4 days Libyan Oil Output Covers 25% Of 2017 Budget Needs
  • 4 days District Judge Rules Dakota Access Can Continue Operating
  • 5 days Surprise Oil Inventory Build Shocks Markets
  • 5 days France’s Biggest Listed Bank To Stop Funding Shale, Oil Sands Projects
  • 5 days Syria’s Kurds Aim To Control Oil-Rich Areas
  • 5 days Chinese Teapots Create $5B JV To Compete With State Firms
  • 5 days Oil M&A Deals Set To Rise
  • 5 days South Sudan Tightens Oil Industry Security
  • 6 days Over 1 Million Bpd Remain Offline In Gulf Of Mexico
  • 6 days Turkmenistan To Spend $93-Billion On Oil And Gas Sector
  • 6 days Indian Hydrocarbon Projects Get $300 Billion Boost Over 10 Years
  • 6 days Record U.S. Crude Exports Squeeze North Sea Oil
  • 6 days Iraq Aims To Reopen Kirkuk-Turkey Oil Pipeline Bypassing Kurdistan
  • 6 days Supply Crunch To Lead To Oil Price Spike By 2020s, Expert Says
  • 6 days Saudi Arabia Ups November Oil Exports To 7-Million Bpd
  • 6 days Niger Delta State Looks To Break Free From Oil
  • 7 days Brazilian Conglomerate To Expand Into Renewables
  • 7 days Kurdish Independence Could Spark Civil War
  • 7 days Chevron, Total Waiting In The Wings As Shell Mulls Majnoon Exit
  • 7 days The Capital Of Coal Is Looking For Other Options
  • 7 days China’s Sinopec Puts $1B Argentina Oil Assets Up For Sale
Mad Hedge Fund Trader

Mad Hedge Fund Trader

John Thomas, The Mad Hedge Fund Trader is one of today's most successful Hedge Fund Managers and a 40 year veteran of the financial markets.…

More Info

Could Natural Gas Prices Be About to Jump?

Name one of the best performing assets since the “RISK OFF” trade started and it would have to be natural gas. You may recall my waxing bullish on this simple molecule in my piece seven weeks ago. Since then, natural gas has rocketed by 30%.

My call then was to wait for the cold summer that the weather models were then predicting to crater this clean burning fuel and load up on the cheap. It seems that the weather models are never right. Instead, The US East Coast is suffering a broiling summer, and it has been off to the races for natural gas.

There have been other structural developments that have helped boost prices for CH4. With oil prices over $100 a barrel, the integrated majors are diverting rigs to new onshore oil development where the huge profits are, instead of using them to extract more underpriced gas. So gas rig counts are down, and industry insiders don’t expect an upturn until gas gets up to $7-$8/BTU, up from the current $4.85. This is limiting new supplies coming on stream from shale gas unlocked by the new ‘fracking” technologies.

On top of that, an increasing number of utilities are taking advantage of low gas prices to switch over from coal. Others are making the change purely for environmental reasons, as natural gas produces only half the CO2 emissions and none of the NO2 or SO3 when compared to oil fired plants. The last coal fired plant in California was recently closed, where utilities like PG&E (PGE) are racing to obtain 30% of their power from alternatives by 2020. This is why the International Energy Agency expects American natural gas demand to increase by 50% over the next five years.

What’s more, traders no longer have to fear weather spikes from gas prices, like the hurricanes of the past, as so much of the new gas supplies are coming from onshore. Very little new gas now comes from the Gulf of Mexico when compared to past years.

Longer term, the 800 pound gorilla for this market is the prospect of exports to Asia, especially energy hungry China. They haven’t started yet as the infrastructure is not in place, but it is under construction. When that happens you can expect the crude/natural gas price gap to disappear. Gas currently sells for 20% of the price of crude on a BTU basis.

How to play it? Don’t touch the ETF (UNG) which has one of the worst tracking errors in the industry. Instead, invest in individual producers, equipment suppliers, and pipeline companies, like Chesapeake Energy (CHK), Devon Energy (DVN), Cheniere Energy (LNG), and Southwestern Energy (SWN).

Natural Gas

Natural Gas - 2

Devon Energy

LNG

By. Mad Hedge Fund Trader




Back to homepage


Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News