Natural
gas prices are likely to plunge again once the next phase of mild weather sets
in, on abundant supplies of shale gas and very little export opportunities from
North America.
Power
producers and electric utilities have been quick to switch over to natural gas,
given its lower prices, wider availability and being more environmental
friendly compared to other fuel sources.
Get Complete
Technical Analysis on The Natural Gas
In
April prices of natural gas had bottomed out at a decade-low of $2 per million
Btu (British thermal units) and sine then has been fairly range-bound, just
breaking out above $3 in early July before settling down once again.
Now
analysts are expecting the prices to dip again, maybe even below $2 a unit. For
power generating companies which have switched over to natural gas as fuel the
drop in prices have come as a boon, though not so for investors.
Yesterday,
prices of Natural gas soared 4% to above $3 mark in the intrda day session, but
it couldn’t hold it gains and ended at $2.94. This morning, futures slipped 3%
to $2.84 per 1,000 cubic feet.
If
the gas is sold at $10, producers stand to make good profit. That margin
narrows when the prices gown to $4 to $5 a unit.
Data
released by the U.S. Department of Energy shows that the country’s inventories
of natural gas are at 20 percent above their five-year average. This year's
unusually hot summer saw a lot of demand for electricity generation (to run air
conditioners) and many of these power producers were using natural gas, demand
for which rose 21 percent from a year earlier.
For
the first time ever, natural gas has drawn level with coal as the major power
generator in the U.S. during the month of April. Part of it is due to environmental
protection laws which restrict the use of coal and part of it is due to the low
prices of gas.
United
States Natural Gas Fund, LP(NYSEARCA:UNG) is now down 2.16% to $ 19.46. Notable companies are which
are directly or indirectly effected by the price movement in natural gas are:-
The
entire coal sector is directly co related to gas’ price and hence host of thermal
coal makers saw massive rally in the previous trading session with Market
Vectors-Coal ETF(NYSEARCA:KOL ) surged 2.60%. Alpha Natural Resources,
Inc.(NYSE:ANR) was up 15% yesterday, Peabody Energy Corporation(NYSE:BTU) and Arch
Coal Inc(NYSE:ACI) were also among top winners.
How Should
Investors Trade The Coal Sector Now, Get Free Special
report
Cheniere
Energy, Inc.(NYSEAMEX:LNG) was up 3%.
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