By Matthew Weinschenk
In 2008, natural gas tumbled from $13 per Mcf to around $4 per Mcf. Almost from the start, plenty of prognosticators likened this natural gas tumble to oil's, predicting that prices would bounce back … and fast.
Of course, they were wrong. Natural gas has mostly gone down since. It's only recently shown some life in these last few months.
The problem for natural gas wasn't a slowing economy as it was for oil at the time. The issue instead was that natural gas production skyrocketed and we don't yet have the technology in place to use it all up for power.
But now, according to the futures markets, natural gas speculators and consumers have finally given up their bullish bets.
That is, for the first time in five years, the consensus forecasts and the futures contracts agree on the future of natural gas prices …
Since 2009, analyst forecasts have predicted a rise in natural gas prices. Meanwhile, the futures contracts also predicted a gain, but came much closer to a proper prediction of the average price for the year. You can see on the chart that the spot price in 2009 was around $4.00. The futures contracts suggested a year-end price above $6.00, and analysts' estimates averaged around $7.00.
That disagreement between analysts, futures and the real market persisted - until now. For the first time, the forward rates and the analysts' estimates agree. And they predict a rise in natural gas prices from its current $3.10 per Mcf to $3.70.
In other words, the expectations for natural gas prices are lower than they've been in half a decade.
But we know already how the natural gas story will ultimately play out: The United States will develop the infrastructure necessary to use this newfound source of energy. Natural gas power plants, vehicles and more… Any application where natural gas makes economic sense will switch to natural gas use.
Eventually, this demand will cause prices to rise. If we build an infrastructure to export natural gas, then we'll see a very big jump. And that makes this the most bullish sign yet.
Indeed, it may be cliche, but the adage that you buy when "there's blood in the streets" works. So start preparing for the imminent rebound, because opportunities like this don't come around often. And "the chase" continues ...
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.