Natural Gas Sold Out: Stage Set for Long-Term Price Doubling

As natural gas seems to be reaching its current supply limits globally, the outlook appears encouraging for further gains in stock price for buy-recommended natural gas producers including the world’s largest, Gazprom (OGZPY.PK). China apparently outbid Europe and the U.S. for the last uncommitted volumes from Qatar, the world’s leading producer of liquefied natural gas [LNG].

Qatari Energy Minister Abdullah bin Hamad al-Attiyah says, “We are not in the charity business. Whoever will give me the best price, I will follow him.” Quoted by Bloomberg, the minister adds with finality, “We are sold out.” Because it can be transported anywhere, LNG is the chain that links global markets for natural gas to an oil-equivalent price.

Anecdotally, the price of incremental natural gas supply in Asia may be approaching $20 a million btu. Near-month futures quotes are about $12.40 at the National Balancing Point in the U.K. and about $10.60 at the Louisiana Henry Hub in the U.S. Since futures have been publicly quoted for six years ahead, natural gas is at an all-time low relative to oil. The stage is set for a quick doubling of long-term natural gas price that would have positive profit implications for producers anywhere in the world.

Originally published on April 22, 2008.

Comments

[Philly Jim:]

The U.S. is missing out big time! While the rest of the world sets up these Sovereign Wealth Funds and goes prancing around the world buying power and prestige, our states are spending 60% of their budgets on WELFARE and flower lovers are preventing our oil companies from exploring on our own land. We are so backwards! The Russians are taking over where the U.S. oil Gods left off. They are exploring in areas like the Bay of Bengal, in cooperation with Burmese dictators we should have leveled off years ago, where they recently found the worlds largest known supply of natural gas - the Indians are gonna have a better energy supply then we will! We let that midget Hugo Chavez threaten us on our own soil?!!? The CIA must be made of a bunch of psychology and humanities majors who want to "understand" differences in the world. Uncle Sam needs to grow a set off balls and take back its cities and energy supplies before the rest of the world uses our flag for a doorstep. >=( grrrr...

2008 May 05 03:01 PM

[Housed:]

This is the biggest top in commodities I have every seen, comments like "quick double" and "we have no more supply" are ubiquitous. We are inches away from the equity markets breaking down and the consumer is running thin, yet, hey let's rip a quick double out of natural gas while reserves are a record levels and temperatures have been mild.

2008 May 05 03:40 PM

[darcydancer:]

I think the author is lon.

2008 May 05 06:03 PM

[crimfunk:]

This is no top just the beginnings of the supercycle. Snagged Wolfe's rec of COS.UN a few years back which netted 300%+ return plus a huge div.

2008 May 05 08:50 PM

[zenalgorithm:]

We are in a NEW ERA! of energy usage, people will pay whatever they have to in order to have gas or oil to fuel their exploding economies.

This NEW ERA! however is different from the new era of tech 2000 and the new era of current housing values - seen these past few years. This new era is for real this time...

2008 May 05 11:33 PM

[sliman:]

Wulff has a better record than most talking heads.

2008 May 06 08:56 AM

[NOWHEREMAN:]

House...I think you have been hosed...recheck your stats,
Nat. Gas levels used to be at record levels...no longer.

The nitrogen fertilizer companies have been gobbling up nat. gas...thats why when they were supposed to drop , they didn't...

Three years of Hurricane free Gulf anyone?

2008 May 06 09:43 AM

[pockyclips ...:]

We pis**d away our 35 year window of opportunity, and boy are we gonna pay. The Saudis first screwed us infidels back in '73, and we haven't learned anything since. What we did to the Russians back in the '80s, they and the Saudis are doing to us now.

Blaming no ANWR development for our situation is like blaming Saddam for 9/11. When you let the foxes guard the henhouse, you end up with no chickens. Bush and Cheney got theirs, and we'll be getting ours, without Vasoline.

Natural gas doubling only equates BTU-wise to $100/barrel oil. You'll have to burn your furniture to keep a 3000 sq. ft. house warm.

2008 May 06 02:36 PM

[Urbane Gori...:]

I agree with the prior post... Hudlow should spam elsewhere. However, I disagree with a couple of the prior posts..

The US needs to consider energy independence in all of its forms... Listen to T. Boone Pickens, look at Israel and Iceland... Lets try not to be the last country to do something useful. Lets face it, if we need oil, transforming coal would be the best move for us.. We have a 300 year supply. If the Germans could convert coal during that last two wars, there is no reason why we could not do so now. And, think of the building boom and job creation here in the US. Unfortunately, we have had 7+ years of an East Coast loser, pretending to be a President. (Have you ever seen him any happier than when he's dressing up as either a cowboy or a pilot?) Perhaps, if we weren't so busy blowing holes in foreign countries, we could get our own act together.

And, Kurt Wulff is very well respected.... Check out his website devoted to the McDep ratio. Read some of his articles...

Thx jegan ;-)

2008 May 06 04:05 PM

[Old Trader:]

pockyclips,

If you haven't read "Twilight in the Desert", I would highly suggest it. The first section covers the creation of Saudi Arabia, and the House of Saud, and gives some insight as to WHY the Saudis "screwed" us in the first embargo.

jan

2008 May 06 11:23 PM

[tqft:]

Have any of you been paying attention to Australia & the deals the (British) BG group has done towards securing natural gas (from Coal Seams) for a new LNG plant in Queensland?

Also have a second look at Santos (STO in Australia) but traded as ADR's in the US.

2008 May 07 04:41 AM

[adamnb:]

Great discussion, folks. Only want to add one thing. ANWAR is insignificant compared to building a natural gas line from the North Slope, Alaska, with staggering reserves that until recently was flared and now is still being pumped back into original mines. It's incredible that the gas pipeline wasn't built in the '80's as originally planned to parallel the 700 oil line to Valdez . Now we're talking about piping gas across the Canadian Yukon, some 3,500 miles to Alberta, at an estimated cost of $12 billion. My guess, it will cost much more and likely never be built.

2008 May 08 06:20 PM

[seesaw:]

You Americans can forget about building pipelines from Alaska over Canadian soil. We are not going to let it happen because China is going to pay us more money for natural gas and oil. U.S.A. dug its own financial grave with its own faulty attitude and thinking.

2008 May 09 10:51 AM

[adamnb:]

The former comment makes my point; don't expect the Alaska/Canada gas pipeline to be built, but an all Alaskan pipeline could be and should be built. There is no shortage of gas at the North slope, and expect enormous reserves coming on stream in the next few year from the new federal leases in the Chugach Sea.

2008 May 09 03:44 PM

[xander:]

how is bush to blame for the democrats in the senate who have blocked his efforts since 2001 to get permission to drill in anvr ? they also have blocked drilling in the outer continental shelf-easy and cheap drilling in shallow water.

2008 May 12 02:44 AM

[legmaker:]

I like your call here, investors keep getting scared when something goes up instead of looking at supply and demand issues first. Dennis Gartman seems to believe nat gas is positioned well.

2008 May 20 10:43 PM