Natural Gas Prices - Which Kind Of Perfect Storm?

Apr. 09, 2016 5:23 PM ETUNG, UGAZF, DGAZ, BOIL, GAZ-OLD, KOLD, UNL, DCNG39 Comments

Summary

  • 'Perfect Storm' could drive natural gas prices to historic lows.
  • But another perfect storm may evolve.
  • Epic hurricane season.
  • Scorching hot summer.
  • Bitter cold winter.

For more than two years, natural gas prices have been in a downtrend. This past winter was a disaster. The commodity has lost 65% of its value since its peak in February 2014.

El Niño produced the warmest U.S. temperatures on record this past winter.

The storage surplus swelled to its five-year maximum, as measured by the Energy Information Administration (EIA).

But one market commentator penned an article explaining that the market could even get uglier this summer. The author sees a "perfect storm" of conditions that may line up to produce "unimaginably low prices" that can be "historic."

Epic Hurricane Season

Bill Kirk, CEO of Weather Trends International (WTI), sees a different kind of perfect storm brewing. All of the climate indices and statistics are aligning to set the stage for a very active and destructive 2016 hurricane season in the Atlantic Basin with several land-falling hurricane threats for the U.S. He thinks it may be an epic hurricane season. This video explains why.

Unlike other weather forecasting firms, WTI uses a unique approach that provides long-term (one-year out) forecasts. Since 70% of the earth is covered by water, and ocean temperatures do not change quickly, they focus on oceanic cycles. As WTI explains it, once a cycle starts (El Nino is one of the 24), it stays that way for an extended duration, so knowledge of these cycles combined with advanced math, statistics, and probabilities make it possible to provide much more accurate year-ahead forecasts than the physics-based meteorological models that only work well a week out. I have worked with WTI and know first-hand the quality their work.

AccuWeather just recently published their hurricane season for 2016. They are also forecasting a more active season as well, two more-than-normal storms.

For those who were not in the

This article was written by

Robert Boslego profile picture
5.79K Followers
Energy futures model portfolio and market analysis from an oil expert.
Seeking Alpha Marketplace Premium Service: Boslego Risk Services.

Managing Director, Boslego Risk Services

Harvard College, Economics (Honors), BA

Undergraduate thesis: "OPEC Pricing Strategy."

Harvard Business School Case Study: "Industrialized World and Oil."

Stanford University Graduate School of Business, MBA


I founded Boslego Risk Services and became a recognized expert in the area of energy price risk management (hedging) and trading, providing oil and natural gas hedging strategies to major oil companies such as Exxon, Shell, Mobil, Chevron, Texaco and Phillips; to the national oil companies of Norway, Venezuela, Mexico, Canada, France and Italy; to major users of energy products, such as Delta Airlines, United Airlines, Burlington-Northern Railroad, and Canadian Pacific Railway.


I also provided frequent market assessments and recommended trading positions to major trading firms, such as Enron, Phibro, Sempra and Vitol, and to large hedge funds.


As the recognized expert in energy hedging, I was selected by the former president, John Treat, of the New York Mercantile Exchange (NYMEX) to write the chapter on hedging in his book, Energy Futures (1990, 2000).



Disclosure: I/we 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 (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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