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VelocityShares 3x Inv Natural Gas ETN Message Board

  • urineandblue urineandblue Apr 6, 2013 9:06 AM Flag

    Barron's says the natural gas bubble is ready to pop

    Commodities Corner
    | SATURDAY, APRIL 6, 2013
    Gas Bubble Ready to Pop

    By JERRY A. DICOLO | MORE ARTICLES BY AUTHOR
    Prices have climbed 23% this year. But there's too much supply and fading demand, so long investors should think about selling.

    DJ-AIG Commodity Indexes

    The rally in natural-gas prices looks set to fade.

    Futures have surged 23% this year, reaching the highest level in 20 months Friday. But despite the recent gains, many analysts believe that gas futures rose too fast, and are still too high—and ripe for a big pullback.

    "Once the cold winter weather passes, we think support is likely to prove flimsy," said Credit Suisse analysts in a research report late last month. The bank recommends that investors start preparing for a price decline.

    A blast of chilly weather at the tail end of winter was the primary cause of the rally. March temperatures were colder than normal across much of the U.S., which increased demand for gas-fired heating and resulted in a steep decline in U.S. natural-gas stockpiles.

    The drop in inventories removed the biggest weight on prices over the last year and a half—too much supply thanks to vast amounts of the fuel unlocked from shale-rock formations by new drilling techniques, which sharply increased U.S. production. This time last year, U.S. gas reserves stood roughly 60% above five-year average levels—and prices were on their way to a 10-year low of $1.907 per million British Thermal Units, notched last April.

    On April 4, the U.S. Energy Department said that stockpiles fell below the five-year average for the first time since September 2011—to 1.687 trillion cubic feet last week, or 2.1% below the average. Natural-gas futures rose 2.5% for the week on the New York Mercantile Exchange, settling at $4.125 per million BTUs Friday. Market analysts are looking ahead to spring, when gas usage by homes, businesses, and utilities typically declines.

    Roughly half of U.S. homes use natural gas for space heating, and many more h

 
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