Natural gas is a natural source of energy, mainly containing methane. This source of energy is used for generating power for machines and vehicles, producing electricity, and providing heat. Natural gas is usually found deep in rock formations or hydrocarbon reservoirs. Natural gas is the cleanest fossil fuel, when compared to coal and oil, as it produces less carbon dioxide. A new method of extracting natural gas through hydraulic fracturing, otherwise known as “fracking,” has opened more potential reserves. Fracking has enabled the U.S. to have one of the world’s largest recoverable reserves of natural gas.
The recent pullback in many commodities has caused most investors to worry that perhaps the boom in commodities is over. Because of austerity and fiscal tightening around the world, countries and companies are reducing the amount of money they’re spending, which is much like the behavior of a consumer who has run out of credit and is consequently reducing his or her spending.
This will certainly have a negative impact on the commodities super cycle we’ve seen over the past decade. However, there is an investment opportunity that can benefit both the U.S. and Canada, and that opportunity is in the natural gas market sector.
Remember, when making an investment, one must understand what the advantage is for a market sector. Both the U.S. and Canada have a massive amount of natural gas in comparison to the rest of the world—that is our competitive edge.
This is providing a huge investment opportunity over the long term for the natural gas market sector. Both the potential to export natural gas and the ability of companies to use natural gas as an input will create a massive investment opportunity relative to other markets in the world.
Chart courtesy of www.StockCharts.com
Spot prices for natural gas have certainly rebounded from the lows of 2012, yet the commodity trades at a fraction of the price on the international market. Spot markets for natural gas in Asia can be four to five times higher than those in America.
Additionally, over the next decade, there will be increased demand for natural gas globally, as it is a cleaner fuel alternative to other possibilities, such as coal. … Read More
Natural gas prices are notoriously volatile. From approximately $4.50 per one million British thermal units (MMBtu) last year to a low near $1.90 MMBtu in April, this represents a huge swing with massively divergent market views. Natural gas has become a great asset for the U.S. America is able to produce natural gas at a significantly lower cost than anywhere else in the world. This has led to a large increase in the supply, leading to a negative market view on price. The reason for the negative market view on the price of natural gas is a lack of storage facilities and an inability to ship the commodity overseas.
The storage facilities for natural gas earlier this year were on pace to be completely filled. If that were the case, the price for natural gas would have collapsed completely. If oil producers that also have natural gas being pumped out of wells have nowhere to store it, they would have no choice but to burn it up or flare it. However, Mother Nature has come to the rescue for natural gas prices, as the high temperatures across the nation have increased natural gas consumption for electricity use to generate air conditioning, improving the market view.
Much of the market view for natural gas is based on external factors, such as weather, and this can be extremely difficult to predict. We all know how difficult it is for the weatherman to be accurate; now you have to combine supply and demand dynamics with Mother Nature. As Texas accounts for a large portion of natural gas electricity generation, the weather in the … Read More