• 5 minutes 'No - Deal Brexit' vs 'Operation Fear' Globalist Pushback ... Impact to World Economies and Oil
  • 8 minutes China has *Already* Lost the Trade War. Meantime, the U.S. Might Sanction China’s Largest Oil Company
  • 12 minutes Will Uncle Sam Step Up and Cut Production
  • 10 hours OPEC will consider all options. What options do they have ?
  • 4 hours Danish Royal Palace ‘Surprised’ By Trump Canceling Trip
  • 7 hours Trump vs. Xi Trade Battle, Running Commentary from Conservative Tree House
  • 6 hours NATGAS, LNG, Technology, benefits etc , cleaner global energy fuel
  • 4 hours A legitimate Request: France Wants Progress In Ukraine Before Russia Returns To G7
  • 13 mins Not The Onion: Vivienne Westwood Says Greta Thunberg Should Run the World
  • 14 hours What to tell my students
  • 18 hours Recession Jitters Are Rising. Is There Reason To Worry?
  • 13 hours With Global Warming Greenland is Prime Real Estate
  • 12 hours China Threatens to Withhold Rare Earth Metals
  • 1 day Maybe 8 to 10 "good" years left in oil industry * UAE model for Economic Deversification * Others spent oil billions on funding terrorism, wars, suppressing dissidents, building nukes * Too late now
  • 23 hours CLIMATE PANIC! ELEVENTY!!! "250,000 people die a year due to the climate crisis"
Dan Dicker

Dan Dicker

Dan Dicker is a 25 year veteran of the New York Mercantile Exchange where he traded crude oil, natural gas, unleaded gasoline and heating oil…

More Info

The Natural Gas Play To Start The Year

For most of 2016, we searched for value in oil stocks, while ignoring natural gas. But while I believe oil stocks will have a great 2017, I also see terrific value coming in natural gas stocks at various times during the coming year. One of those moments, I believe, is now.

We had an interesting end for natural gas in 2016, as prices spiked overseas, sent higher with the intensity of the cold weather in Europe. While the Arctic has experienced one of the warmer starts to winter on record, that has been balanced by the historic cold that began in the Russian Siberian plains and has been sweeping westward through Eastern and Western Europe. The big move upwards in European natural gas, while it should have limited effect here in U.S. markets, did instead inspire quite a strong influx in speculative buying towards the end of the year, marking one of the most overall bullish positionings in U.S. natural gas futures we’ve seen since at least 2014.

(Click to enlarge)

I say this is all interesting, because it never fails that markets will look to respond negatively to a majority position, even if the fundamentals are very strongly in their favor. Sure enough, natural gas took a major dive starting on Tuesday, and continuing through Thursday, as markets punished those traders who thought that the strong coming of winter in Europe would translate into $4/mcf + prices in February here in the U.S.

(Click to enlarge)

I continue to call this massively volatile move to the downside interesting because I believe the traders, for the most part, had it right – fundamentally, there are real reasons to believe that the gluts that have plagued U.S. natural gas prices are in the process of clearing, and very quickly so – leaving a grand opportunity right now to take the panicked positions of ‘long and lost’ natural gas traders from them at relatively bargain prices.

Here is a representation of how quickly stockpiles are shrinking here in the US, despite a much warmer than normal November and December:

(Click to enlarge)

It’s fairly rare to see the majority of traders flood into a trade prematurely to the degree that they cause their own collapse, but I believe that’s precisely what we’re seeing here, despite all the fundamentals saying to the contrary that their analysis and instincts were right. It does happen far more often in natural gas than just about any commodity, as even the smallest ‘leak in the dike’, for example the 50+ degree day we had on Tuesday, would be enough to cause the avalanche of panicked longs that we’ve been seeing.

Still, I think it creates a short to mid-term opportunity to buy just about any dedicated natural gas stock you’d like for the next few weeks – with a terrific risk/reward.

My favorites are currently EQT and Southwestern (SWN), but any should react positively to the return to fundamentals that dropping stockpiles and colder weather would suggest, including Range Resources (RRC), Cabot Oil and Gas (COG) and even Chesapeake (CHK).

For today, there’s a quick chance to make some money in natural gas. And I suggest taking it.

Oilprice - The No. 1 Source for Oil & Energy News
Download on the App Store Get it on Google Play