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Summary

  • The price of natural gas is down approximately 80% over the last 5 years due to the explosion in supply brought on by the technology of fracking.
  • This supply/demand dynamic, combined with the characteristics of gas as a cleaner and cheaper alternative and the higher price abroad, all point to a higher long-term natural gas price.
  • The short-term opportunity to trade natural gas comes from the weekly release of inventory data on Thursday morning at 730am PST.
  • Now is the time to start watching (UNG) and (UGAZ).

Natural gas runs cleaner than oil, it is dramatically cheaper than oil and the U.S. has the largest reserves of natural gas in the world. Due to the current cost of transporting the gas, the price of natural gas is dramatically higher outside of the U.S. That gap will close over time.

So why the big opportunity? The price of natural gas is down approximately 80% over the last 5 years due to the explosion in supply brought on by the technology of fracking. Now supply is not growing at nearly the pace it was and demand is growing dramatically. That sets up a very positive long-term bias. So this supply/demand dynamic, combined with the characteristics of gas as a cleaner and cheaper alternative and the higher price abroad, all point to a higher long-term natural gas price.

There are two pure play ways to invest in natural gas: (NYSEARCA:UNG) which is an ETF that tracks the price of natural gas and (NYSEARCA:UGAZ) which is an ETF that moves 3x the price of gas.

The short-term opportunity to trade natural gas comes from the weekly release of inventory data on Thursday morning at 730am PST. The price of gas reacts to these inventory numbers almost every week and given various seasonal trends and one's overall perspective on the longer-term trends, it is an excellent trading vehicle as well. More details and thoughts to come in future articles. Start watching (UNG) and (UGAZ)!

Source: Natural Gas Offers Great Short- And Long-Term Opportunities