[daveking]

I'm doing some research on Natural Gas. The price of natural gas seems to be at an all time low.

Currently in Canada, natural gas is trading around $3 per whatever unit they trade at. NGX.com

As we all know, crude OIL is making a comeback this summer. It was $30 a barrel a few months ago and now it is over $60 and many analyst are prediction $80 a barrel by August 2009.

I wouldn't be surprise if Natural Gas does the same. A few months from now it will be trading at $6.

Here is a snapshot of the US Market for Oil and Gas:

Currently there are two ETFs that track Natural Gas on the Toronto Stock Exchange. Claymore GAS.TO and HNU.TO (Horizon Betapro 2x NG Bull.)

I don't recommend holding HNU for Long Term as it's a leveraged ETF which is reserved for short term day traders. Claymore gas hit it's 52week low last week at $6.72.

I am wondering what others are thinking about the price Natural Gas? Are you bullish as I am?

Disclosure: I own 400 shares of GAS.TO at $6.86. Holding it until next summer.

 

[CanadianCapitalist]

I don't invest in commodities directly but I've read that Natural Gas could be unusually cheap. I don't have an opinion on that but if it is true, wouldn't it be better to invest in Natural Gas producer such as Encana (ECA)?

Though it is possible that ECA hedges Natural Gas prices but sooner or later the lower priced hedges will run out.

 

[takingprofits]

The seasonality of natural gas is also an issue and my understanding is that prices usually rise in the spring - buy in January and sell in May.

With that in the back of my mind I have not been thinking about natural gas at this point.

 

[somecatchyprase]

I recently bought the Claymore Gas ETF (GAS) at $7.40.

A vital commodity is selling at, near, or below the cost of production, this puppy has nowhere to go but UP.

With the dramatic decline in drilling activity we’ve witnessed, it’s just a matter of waiting for stored inventory to deplete.

Looking for a double, possibly even a triple, at some point in 2010.

“ Ziff calls for shutting in gas to revive market: Vice-president says prices only half of costs”
Shaun Polczer, Calgary Herald, June 6, 2009

http://www.calgaryherald.com/business/Ziff+calls+shutting+revive+market/1668697/story.html


"Tertzakian: Shaky ground for natural gas"

http://www.calgaryherald.com/business/fp/Tertzakian+Shaky+ground+natural/1672564/story.html

 

[canadianbanks]

Have you though about the possibility of another major stock market crash and what that would do to energy markets?

 

[ethos1]

I'm doing some research on Natural Gas. The price of natural gas seems to be at an all time low.

I am wondering what others are thinking about the price Natural Gas? Are you bullish as I am?

Disclosure: I own 400 shares of GAS.TO at $6.86. Holding it until next summer.

on the NYSE symbol DIG

http://www.google.com/finance?q=dig

 

[daveking]

Actually, I think it would be better to be in commodity if there is another stock market crash.

Have you though about the possibility of another major stock market crash and what that would do to energy markets?

 

[mogul777]

Actually, I think it would be better to be in commodity if there is another stock market crash.

True enough. Not like the price of natural gas, which is primarily an HVAC fuel, goes up and down with the stock market. What you normally look at is the relationship to oil and here you will see it as undervalued.

Regarding Encana as you can see this stock has taken off with the rest of the market and really has little correlation with the price of natural gas eventhough that is a fair chunk of what Encana does. What can I say investors are by and large idiots.

 

[somecatchyprase]

IMO, natural gas is so undervalued that it could do well even in a broad market decline.

My rationale for owning it is based on cost of production.

At present, there is a supply glut in natural gas. This will correct itself in time. In a few years, we could well have a supply glut in paper dollars, chasing nominal asset values higher.

Even if we’re entering an economic downturn far more serious than what the government and “green shoots” crowd would have us believe, there will always be some market for gas.

At the end of the day, the gas will stay in the ground, unless there’s a profit to be made in extracting it and bringing it to market.

As a final thought, can anyone name anything else that it still trading close to it’s 2008 low? I can't.

 

[somecatchyprase]

More on this topic from today's Globe and Mail:

http://www.theglobeandmail.com/video/bermans-view/article1173519/

 

[canadianbanks]

Actually, I think it would be better to be in commodity if there is another stock market crash.

I agree, however in the beginning of the crash it's likely that everything will go down, and you can buy at much lower levels.

 

[shepherd]

if the market falls so will resources and just as hard. just look at what the resources and resource stocks in the last bull market, they made all time highs.

how did oil, gas, base metal stocks, you can even throw gold in there, yes I owned yri and it hit 4 and change. they all went down even further than the market. the base metal stock got killed.agu went from 116 to 28, nxy 43 to 13, su 71 to 18. tck 45 to 3

natural gas need an economic recovery in the US growth probably of 3%+ do not see it coming, though maybe 2010. also the amount of new supply coming on and the amount in storage...believe it is dead money in 2009.

thanks
selkirk

 

[el oro]

Natural gas is a safe bet. With the coming inflation/fall of the US dollar, commodities will be the place to be. I prefer precious metals, oil and agriculture. Buy quality gold stocks now and watch them soar over the next few years. You won't see prices this low again for a while... after June/July.

 

[humble_pie]

thinking gassily, not really started buying yet.

low price is tempting ... but shephard has good point when he says gassy money is "dead money" for the rest of 2009. What if oil descends towards gas' level on a price/btu basis instead of the reverse.

apparently low north american gas price is related to huge oversupply plus cheap shale-derived gas coming onstream plus shipments of LNG commencing even in canada. Does anybody know whether that LNG carrier did land as scheduled at the brand-new LNG terminal in st. john's NB this past week.

i would not buy GAS. I would buy instead a gassy producer. I think there may be misconceptions about GAS and other commodity-based funds using short-term futures. GAS holds a one-month futures contract which matures and pays every 30 days. Funds then get reinvested in the next month's contract. So this means that every 30 days, or 12 times a year, this ETF gets rebalanced. In other words, gains are not cumulative. This feature will act as a slight arithmetic drag on the unit price IMO. To illustrate with a too-simplistic example, suppose natural gas rises at the same rate for one entire year. The ETF GAS will hiccup 12 times, rising a notch higher with each burp. (i have noticed that at present the mgrs are holding about 36% in cash, so cash management is one of the factors that will distort the 12 gassy belches.)

on the other hand, common stock in a quality gas producer will not get pegged back at frequent regular intervals, will rise exponentially if natural gas the commodity rises, is not subject to this numeric drag.

the double-leveraged gas ETF on the nymex is even more subject to short-term repegging. It gets rebalanced daily.

so far, my gassy potential picks include tristar, vero, encana. If i decide to light a fire in the sector.

 

[humble_pie]

gassing up last friday on bnn - Bill Harris of avenue investment sees gas inevitably bubbling up when renascent business revives demand for energy. Says nobody can predict when, so the time to start building a position in gas is now.

Harris tells bnn's howard green that investors need to "own something that will not go bust in the meantime" and should select low-cost producers with good balance sheets. He would be somewhat concerned about questerre (sorel & adirondack extension gas shales) ability to survive present earnings drought.

Harris' own big bet, he says, is progress energy.

anybody following progress PRQ, a corporation forged in january 2009 by merging 2 former unit trusts ?

 

[FrugalTrader]

So far for natural gas commodity plays: GAS.TO (single), HNU.TO (double) HUN.TO (single).

So far, for natural gas stock exposure: ECA.TO, VRO.TO. TOG.TO

Any others?

 

[humble_pie]

oh my, some are up 25% in 3 days ...

to add: Talisman (TLM tto & ny) & Questerre (QEC tto) for their Utica shale gas play. This is a major formation extending from upstate new york adirondacks through the lower st-lawrence basin past sorel towards levis, and some say even on to the gaspésie.

 

[FrugalTrader]

Looks like I'm 3 days too late!

 

[Andrew]

Any others?

I have recently taken a big position in TOT.TO (Total Energy). Average cost of $3.76

I also have exposure to CMT.TO (Compton Petroleum) which is also in the nat gas space. Compton is very risky, but has a lot of potential upside if it can restructure its debt. Trading at 0.22 P/B.

 

[dogcom]

I bought a position in the GAS ETF a week ago figuring we were getting close to a deep bottom. I also put in a bid for HNU last Thursday in that big selloff thinking that could be a bottom. I just missed by a few cents and would probably sell that position this week if I did get the bid due to the fact these types of ETF's are not to be held.

I could be wrong but I think the rally in natural gas has just started despite the fact there is alot of gas around.