Time To Do A Test Buy on Natural Gas?

Wednesday, October 14, 2009

Natural Gas Futures are once again hovering near a multi year low. The million dollar question is: "Is this the bottom for Natural Gas?"

I don`t know. I wish I knew. But what I know is that Boone Pickens canceled a wind farm because natural gas was so cheap that utilities were using it to produce energy. This means a lot. Natural gas is becoming the cheapest source to produce energy and Nat Gas is trading at a very high historical multiple to oil futures. The case is strong for Natural Gas, at least longer term.

The thing is dislike about holding natural gas futures is the extreme contango. Rolling it over month after month will just kill you. You need Natural Gas to go over 40% in a year just to cover the contango. Nobody can stand that. That is why UNG, United States Natural Gas Fund has performed so badly.

So, natural gas has to be played for short term spikes or needs to be deleted from the trading platform. I think more money has been lost in Natural Gas then in Las Vegas this year.

Petroleum Oil Gas info Blog is a website for active online futures and stock traders. I will provide my real time trading decisions and my market thoughts on this webpage.


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