Serious Perspective on Nat Gas As I sit here and read the posts from other posters, I can't help but feel the glimmer of hopes they have in natural gas prices for today. Following PMT and reading news about the bottom of nat gas prices and the summer cooling season will draw down inventories. This is not doing proper due diligence. It is ignoring the big picture that I have said all along. Lots of supply will ALWAYS equal a small price. Why?? Because there is so much of this stuff we are swimming in nat gas. The weather as I have said before will not find your $6 gas price, nor will it sustain it there. A quote from CTV - Globe and Mail:
"A hot summer in eastern North America has air conditioners turned on high but it’s not enough to revive still-moribund natural gas prices."
It goes on with the pain to say:
"Leading gas companies such as Canadian Natural Resources are skeptical of a price recovery. The firm has said it could take two years – and as many as seven. In the first quarter, Canadian Natural drilled 26 gas wells. Five years ago, in the first quarter of 2006, it drilled 593."
As I have said before, nat gas prices are dead for at least 5 years to come. During this time 2 things will happen that will give nat gas a glimmer of hope. Firstly, the curtailment of production of nat gas will really hit. Companies are shutting it down with their drilling activity, however this will take time to make its way through the cycle. Perhaps not quite 5 years out, but certainly not now or next year. CapX programs are slicing their budgets and going after oil based prospects. Although this was smart 6 months ago they may be in some trouble if oil keeps sliding. Secondly, the export of nat gas will occur in North America. For now, it is hard to estimate just how much this will be, but there is opportunity to be capitalized on here.
Nat Gas is and will be an excellent opportunity. It will be a painstacking slow ride back up to the top. My advice is to have patience. All these companies in nat gas have great prospects. Some of them better then others. The trick is to know your pain threshold when it comes to loosing your money. Some of these companies will fail, some of them will soar, some bought out. Pick your favorites, understand what it is you are buying and estimate where the opportunity lies. Right now that opportunity is 2015, but the smart will slowly start setting up a VERY LARGE position and pick up shares in these companies all the way up to 2015. By the time 2015 arrive, the last minute investors looking to make a quick buck will be pushing these companies you saw an opportunity today, even higher and that is when you better be on the sell trigger. Remember, the high trend won't last forever but neither will the low trend.
I leave you with the last paragraph of the article from CTV - Globe and Mail
“For natural gas minded investors, it is a serious test of patience for a slow percolating turnaround in North American natural gas prices,” Mr. King wrote in a recent report. “We realized that talking up a more bullish stance for North American natural gas prices might seem too early, or simply wrong. However, our sense it that just when prices are possibly getting ready to move convincingly turn higher, the growls from the price bears have become more defeating. This price bull is wearing ear plugs.”
Happy Capitalism!