I know I wasn’t the only one who vowed to avoid a certain natural gas investment back in 2009.
After all, prices plummeted nearly 70% in less than twelve months, so I can’t blame investors for steering clear, especially after catching a glimpse of what may be one of the ugliest natural gas charts you’ll ever see:
It really doesn’t get much worse than that.
But I guess this is what one should expect from a fund that invests in natural gas futures contracts on the NYMEX — especially as natural gas prices at the Henry Hub in Erath, Louisiana plummeted from more than $12 per MMBtu in 2008.
Three weeks ago, however, a telltale sign made me ignore six of the most painful years for United States Natural Gas Fund. It showed itself on a brutally cold morning a few weeks ago when the brand new battery in my car died.
Sitting in the frigid, sub-zero-degree temperatures that morning, I was flooded with an overwhelmingly bullish sentiment for natural gas prices.
The polar vortex your local meteorologist has been feverishly talking about every morning turned the world’s ugliest natural gas investment into a screaming buy. We’ll even see prices move higher if this frigid weather persists into February.
Now, I don’t expect investment magnates like Warren Buffett to suddenly consider my ‘Dead Battery’ indicator in their investment acumen, but it’s hard to ignore the 35% jump in the United States Natural Gas Fund in the weeks that followed.
The bitter cold has led to several record storage withdrawals, which — as you can see below — have pushed the amount of working gas in underground storage below the 5-year average.
Along with the cold weather, demand has spiked significantly. During the first three weeks of January, U.S. gas consumption exploded, averaging 97.2 billion cubic feet per day.
So much for the great gas glut that emerged from developing the vast shale gas resources in the lower 48 states.
The water gets a little choppier when you realize shale gas is the only thing keeping supply propped up.
Your Only Natural Gas Playbook
At last count, the Americas held 693 trillion cubic feet of proved natural gas reserves, or approximately a tenth of the world’s total, and accounted for one-fifth of the world’s gas trade.
By breaking down U.S. natural gas production, you’ll find that 60% of it comes strictly from shale gas and tight gas resources.
Naturally, one area has been responsible for virtually all of U.S. production growth lately: the Marcellus Shale, which accounts for 18% of U.S. output.
But even though growth in the Marcellus is offsetting production declines elsewhere, the name of the game today isn’t where the gas is, but rather how efficiently it can be produced… and Cabot Oil and Gas is the perfect example.
Over the last four years, Cabot has tripled the EURs of its Marcellus wells to more than 14 Bcf apiece, while lowering its costs by more than 9%.
Compared to one of the world’s largest publicly traded gas companies, ExxonMobil, the returns have been far more rewarding.
How are you not bullish on natural gas yet?
Believe me, the President’s lip service to natural gas as a bridge fuel wasn’t a matter of showmanship.
And it’s a fact you can bank on as the next polar vortex moves in… Just make sure you have the right natural gas playbook on hand for 2014.
Until next time,
Keith Kohl
Check us out on YouTube!A true insider in the technology and energy markets, Keith’s research has helped everyday investors capitalize from the rapid adoption of new technology trends and energy transitions. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital, as well as the investment director of Angel Publishing’s Energy Investor and Technology and Opportunity.
For nearly two decades, Keith has been providing in-depth coverage of the hottest investment trends before they go mainstream — from the shale oil and gas boom in the United States to the red-hot EV revolution currently underway. Keith and his readers have banked hundreds of winning trades on the 5G rollout and on key advancements in robotics and AI technology.
Keith’s keen trading acumen and investment research also extend all the way into the complex biotech sector, where he and his readers take advantage of the newest and most groundbreaking medical therapies being developed by nearly 1,000 biotech companies. His network includes hundreds of experts, from M.D.s and Ph.D.s to lab scientists grinding out the latest medical technology and treatments. You can join his vast investment community and target the most profitable biotech stocks in Keith’s Topline Trader advisory newsletter.
