A Natural Gas Recovery Is a Pipedream
Don’t let it get away!
Keep track of the stocks that matter to you.
Help yourself with the Fool’s FREE and easy new watchlist service today.
Despite a recent rally, natural gas has fallen so far that experts and Fools alike are calling for a recovery. But like a stock, just because a commodity is down doesn’t mean it’s going to go back up.
I’ve been hearing that natural gas is set to bounce back for years as the gap between natural gas and the price of oil has widened. But who cares? There’s no good reason that natural gas and oil prices should be linked. They’re used for completely different things, and the storage and supply dynamics couldn’t be more different.
So let me outline a few things you may want to consider before making a bullish bet on the price of natural gas.
More natural gas than we can use
Low demand hasn’t helped the price of natural gas recently, but extremely high supplies are the real driver of the long-term price drop.
There has been so much supply recently that Chesapeake Energy (NYSE: CHK ) is cutting production by as much as 1 billion cubic feet per day. But that hasn’t stopped everyone else from increasing supply. Range Resources (NYSE: RRC ) increased its proved reserves by 14% and said it replaced a whopping 850% of 2011 production.
With 141 trillion cubic feet of
Read the whole article at: http://www.fool.com/investing/general/2012/01/26/a-natural-gas-recovery-is-a-pipedream-.aspx