• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing
  3. / Energy

The Natural Gas Frenzy Could Be Over

The market has priced in low inventory levels, and stockpiles are starting to rebuild.
By CARLEY GARNER
Apr 25, 2014 | 05:00 PM EDT
Stocks quotes in this article: NG, UNG

In the midst of a historically brutal winter, natural gas prices soared, but now that the bitter season is over, prices might have trouble staying afloat. On balance, energy producers and distributors were caught off-guard by unexpected increases in demand this winter, but that doesn't mean there isn't enough natural gas to go around.

It wasn't that long ago that producers were "flaring" off excess natural gas because it was cheaper to burn it than to try to pipe it and sell it. This practice has nearly stopped, except for areas in which there isn't a proper flow of lines to bring the product to market. Accordingly, there appears to be supply coming down the pipe (pun intended).

We won't deny that short-term supply remains relatively tight. For instance, stockpiles are currently reported to be 899 billion cubic feet (bcf). This is considerably beneath the level at this time last year, which was 1,730 bcf. Nonetheless, we believe the market has had plenty of time to price in the new reality. Thus, unless inventory drops further, the path of least resistance in natural gas pricing should be lower.

Thursday's inventory report from the Energy Information Administration pointed toward a slight build in stockpiles. In our opinion, this trend should continue as demand tapers into the warmer months. Naturally, higher supplies will work against the natural gas rally.

Speculators are mixed on the issue. According to the Commodity Futures Trading Commission's Commitments of Traders (CoT) report, large speculators are holding small to moderate net short positions. Small speculators, on the other hand, are currently net long the market in hopes for a continuation of the trend. In our experience, when the large speculators begin to amass a short position in this market, it is typically a sign of a potential reversal. Similarly, the small speculators are known for having shallow pockets and can easily be scared out of positions (which would lead to selling).

Seasonal patterns don't call for a major top until late June, but an intermediate-term high typically forms in late April. In our judgment, prices will likely retreat to the uptrend line near $4.45. Should this support level break, the next support lies at $4.30; failure there could mean disaster leading to a possible decline to under $4.00.

Please be aware that there is substantial risk of loss in trading futures and options.

Nat Gas, Daily
QST/Barchart.com
View Chart » View in New Window »
Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Garner had no positions in securities mentioned.

TAGS: Commodities | Markets | Energy | Investing

More from Energy

The Fed Blinked and So Did We

Peter Tchir
Jun 27, 2022 9:30 AM EDT

Here's what we need to get a bigger rally.

See That Down the Road? It's the Big 'Green' Bubble, Ready to Pop

Jim Collins
Jun 24, 2022 1:30 PM EDT

Environmental, social, and corporate governance has created a monster and gullible investors should hit the brakes on their EVs and run from the Washington technocrats while they have the chance.

Weber's Rally Was Cooked Up By the Shorts and Something I Experienced First Hand

Jonathan Heller
Jun 24, 2022 10:00 AM EDT

It should be an interesting ride from here.

Will This Year's Energy and Commodity Trades Become Last Year's Tumbling Tech?

Helene Meisler
Jun 24, 2022 6:00 AM EDT

I can't remember the last time anyone asked me about Apple. No one cares.

Here's What You Need to Know About Investing in Energy

Jim Collins
Jun 23, 2022 1:00 PM EDT

The rudderlessness in DC has created an environment that's downright hostile to domestic exploitation of hydrocarbons.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 12:04 AM EDT PAUL PRICE

    Two Good Signs -- Especially for Small-Cap Investors

  • 12:10 AM EDT PAUL PRICE

    More Insider Buying in American Woodmark (AMWD)

    American Woodmark , which I've discussed here fr...
  • 08:55 AM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    The 10 personality traits of successful traders an...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2022 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login