Friday, August 21, 2009

Natural Gas Commodity Prices Drop to a 7-Year Low!

Natural gas closed yesterday (Aug 20,09) at 2.945 per million BTUs on NYME, the lowest closing level for a front-month contract since August 12 of 2002 according to the CME group. The next possible support target is 2.52 per million BTUs, which is the level of March 2002. August has historically been a bad month for Natural gas futures as this 17-year-study chart shows.

(Click on image to enlarge)

The price drop was exasperated by the rise in supply as the EIA reports a rise of 55 billion cubic feet to stand at 3204 Bcf, which is 562 Bcf higher than last year at this time and 513 above the 5-year average. Barring any storms, the glut of supply will continue to hurt prices. – data source MarketWatch

The economic recession is also tampering demand, but new clean energy politics is on the table. T. Boone Pickens has been lobbying congress to use natural gas as the clean-energy solution for vehicles to rid our dependence on oil. “He touted natural gas as the best alternative vehicular fuel because it’s a domestic resource that reduces our foreign oil consumption, and enhances America’s energy security; clean (NGV vehicles emit up to 95 percent less pollution than gasoline or diesel vehicles); less expensive than petroleum and hydrogen; and safe (lighter-than-air compressed natural gas is nontoxic and disperses quickly, and has a higher ignition temperature than gasoline and diesel fuel, which reduces the chances of accidental ignition).”

There isn't a pure trading vehicle for the Natural Gas Commodity, these ETFs are the closest thing available:
Natural Gas Industry: $FCG
Natural Gas Commodities futures: $UNG
Oil and Natural Gas exploration and production: $XOP
Oil and Natural Gas equipment and services: $PXJ


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