Natural gas (UNG) futures dove 3% Tuesday after just getting above its 10 year low. Natural gas prices continue to suffer as the recent weather has soften demand but the inventories continue to pile up. The spot contract for natural gas is down 16% in March and futures traders do not expect any upside in the near term.
Analysts are saying that the season for natural gas will likely end at a record high and that unless there are announcements of production cuts, natural gas will continue to fall. Some traders are saying that you shouldn’t rule out the possibility of $1 price target for natural gas. Currently the April natural gas futures trading on the New York Mercantile Exchange are trading at $2.221 per million British thermal units.
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Unfortunately, we have been experiencing very weird weather patterns this year all over the US. As temperatures begin to rise in the large gas consuming cities such as New York and Chicago, nat gas will have a hard time seeing any upside due to lack of demand.
Last week, the Energy Information Administration released a report showing that total domestic inventories fell to 2.433 trillion cubic feet, which is still at a record for the late winter season.
However, the cheap gas has been gaining support and usage in industrials and also as an additional fuel for utilities rather than expensive coal.
Look when you have production at all time highs with demand near all time lows, prices will continue to fall, that is just basic economics. The natural gas industry will continue to face hardships until they start taking down production.
The Obama Administration recently announced that oil imports were down last month, citing less dependence on foreign fuel. This is a good start but I would not go around toting that we are energy independent, because we aren’t.
The key to use becoming energy independent is natural gas. I believe we could revive our economy and the American Way with natural gas. I believe this because we are sitting above one of the largest natural gas fields in the world. Unemployment would sharply fall as we would need to increase jobs to extract the nat gas and put it in a form that is useable for fuel. Rather than paying over $100 a barrel to countries in the Middle East, let’s use the fuel source at home and further strengthen our economy and our way of life.