Natural Gas Prices Should Heat Up Soon

Panic is taking hold across the country.

Natural gas futures just hit a three-year low.

This time a year ago, investors were licking their chops at the thought of higher natural gas prices.

But now, investors in the sector are panicking over the possibility of natural gas prices dropping below $2 per thousand cubic feet (mcf) again.

Readers should hold steady, though. Things may not be as rough as they seem.

Recovery on the Way

The cold winter of 2013 was the perfect environment for natural gas, pushing prices above $6 per mcf for a short period of time.

That price point didn’t last, though, and we noted that, at the time, options players were betting prices would head even higher to $10 or $11.

It was a one-sided parabolic move from the $4s to the $6s in a matter of weeks. A 50% move in a commodity that’s nothing short of plentiful proved to be a good opportunity to sell.

But today, we’re back to the $2.50 level, thanks to a weak energy sector and gluts in oil, coal, and natural gas.

And these low prices are making investors antsy. You’re probably wondering if you should jettison a natural gas position, add to a position, or maybe even initiate a new one.

Well, here’s the skinny: Natural gas is here to stay. Prices will recover in the next up cycle, which will come sooner than most people expect.

Till Death Do Us Part

You see, natural gas is still the fastest-growing fossil fuel in the world. And its properties make it less polluting than oil and much cleaner than coal. But… it still has to compete with both as energy sources.

With oil prices at half the levels they were this time last year, and coal prices falling off a cliff, the job of growing natural gas usage has become more difficult in the short term.

In fact, a lot more supply has come on board as a result of the oil collapse, as drillers are now capturing and selling natural gas produced in drilling operations instead of flaring the gas, as they have done in the past.

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Author: Travis Esquivel

Travis Esquivel is an engineer, passionate soccer player and full-time dad. He enjoys writing about innovation and technology from time to time.

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