For reasons many of you may know, I’ve been following the NYMEX price of Natural Gas very closely for the past year or so. I’ve seen multi-years highs that made little sense to me…and as recent as yesterday we are seeing 7 year lows in the price of this “clean” fuel. SO WHAT IS THE DEAL, WHY THE BIG UPS AND DOWNS?
It seems like most commodities, the laws of supply and demand are determining the price of Natty Gas. I’m currently reading that stockpiles are nearly 19% above their 5 year average, and that demand is down. BUT WHY SUCH A DRAMATIC FALL?
That is where I see opportunity. I believe that the stick has swung WAY too bearish on natural gas, and that these current depressed levels create a buying opportunity. Yesterday I took a bit of IRA money and pumped it into the natural gas market, hoping that over the next 18 months we are able to see a much more historically normal spread between the price of oil and natural gas. Oil traditionally and historically trades around 8 times the price of natural gas (give or take a bit). CURRENTLY OIL IT IS TRADING AT 24 TIMES THE PRICE OF NATURAL GAS, and I don’t believe this will be sustained.
With the current President being bent towards this idea of “cap & trade” I believe that more and more producers of electricity and going to turn to natural gas more and more as a way to offset their coal fired plants. We will see though!
Just my two cents, I would love someone with some knowledge or a strong opinion on the subject to weigh in! Hopefully soon, before I commit more hard dollars to my Natural Gas theories!