Natural Gas has to be one of the most confusing commodities on earth. I can think of no other entity that is as loved as it is hated. This abundant, clean burning fuel fell another 2.4% to $2.74/BTU today.
"Boone Pickens must be standing upside down on his head because natural gas is so cheap," says Stephen Eubanks, a principal with Mr. TopStep, a futures trading and market insight firm based at the Chicago Mercantile Exchange. "At some point there's got to be some accumulation, but for now, you can't find a buyer."
The reasons behind the rout are the result of both short and long term factors, including the fifth warmest winter in the past 120 years, enormous supply, reserves and capacity, as well as a built in bias for oil - as long as crude prices stay relatively reasonable.
"In the $2's, it has to be looked at," says Eubanks in the attached clip. He points out that there's not that much downside risk left, adding that any sort of political support or meteorological cold snap could spark a major rally, which means the risk in natural gas now is very much skewed to the upside.
Interestingly, Eubanks feels there is also strong technical support for crude oil in the low $90's a barrel, but no real resistance until above it until $116. But as much as he thinks oil is headed higher, from a stock investor's standpoint, he actually wants to see it go down and truly become a tailwind.
And if it weren't already hard enough to make money, Eubanks says the breakdown of the falling dollar/rising oil trade has made it even tougher.
"Lots of people are getting out of trading S&P (futures) and starting to trade oil instead," he says. "A lot of guys still have the wrong trade on, a lot of the old trading metrics aren't working anymore."
Are you buying natural gas as it hovers near ten-year lows?
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- Chicago Mercantile Exchange
- natural gas