Natural Gas on the Cusp

Natural gas futures have proven even more buoyant than the stock market in the last few weeks – with the price of contracts for April delivery having risen nearly 18% in less than a month – and we’re looking at the near term intra-day high of $4.06 set back in November to see if the commodity can set a new 17-month high, reaching a level not seen since September of 2011.

Chart courtesy Finviz.com. Disclaimer: past performance is not necessarily indicative of future results.

But panning back out and looking at the big picture – despite the move back up from the lows in 2012, Natural Gas has remained stuck in a trading range of between $2 and $6 for going on 5 years now. We’re not in the business of long-term prognostication on markets, but we have a strange curiosity for what Natural Gas is doing (probably from our battle wounds around mid-08 when it shot up to $14) – and there are several potential developments that could send the market soaring or plunging:

  • The issue of idle capacity is one we’ve heard several times. The idea is that plenty of companies are sitting on leases with natural gas potential, but haven’t started drilling because of how low prices have been. According to the Congressional Research Service, there are 20.8 million acres leased for oil and gas that are currently not in production or exploration. As prices rise, those areas could begin production, scaling up supply in line with demand to keep prices low.
  • International trade could become a major player – the US exports some natural gas, but such activity is currently limited by a lack of capacity. But there’s a robust debate over whether the US should start ramping up efforts to export Liquefied Natural Gas (LNG). If US gas starts making its way to international markets in larger volume, the increased demand could put upward pressure on prices.
  • And of course, there’s the outside chance of a ban on hydraulic fracturing (fracking), the drilling technique that led to the boom in the first place. It may seem unlikely, but several states – including New York – have already implemented moratoriums on the drilling practice. California is currently considering its own stance on the practice. A nationwide ban still looks very unlikely at this point, but even piecemeal efforts to stymie the practice could place limits on natural gas output.

Fortunately, with CTAs we’re not in the business of predicting the future – only responding to it. No matter which of the above scenarios comes to pass, we’re really just hoping for more sustained trends like this one.

See Also:

Four Years Later: Recovery Complete?

The Future of Natural Gas

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Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.

Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.