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Profiting From Natural Gas: Strategists
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CNBC.com Writer
The weaker dollar has been sending commodity prices higher and while most of the energy sector has moved significantly up as well, natural gas has stayed relatively cheap. How can investors profit from natural gas?
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Chris Jarvis, founder and president of Caprock Risk Management and Addison Armstrong, director of market research at Tradition Energy and CNBC contributor discussed their views.
“Ninety-five to 96 percent of all demand for natural gas here in the U.S. is met with either domestic or Canadian sources, which are very plentiful and production has increased over the year despite declining rig counts and declining exports from Canada,” Armstrong told CNBC.
Armstrong said he expects natural gas prices to remain relatively flat to lower than their current price through next year.
“But in 2011 as the economy begins to rebound more strongly, that’s when you’ll see a pick up in prices,” he said. “Costs for producers right now are also very low—the cost of steel, pipe for transmitting, and labor is very low. So now is a good time to be looking at some of these things.”
In the meantime, Jarvis said sluggish demand fundamentals and record storage have kept prices low, but once Washington decides to make a push toward natural gas, it will set up a bullish play going into next year.
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“There’s a wild card out there that no one’s addressing and a lot has to do with the fact that the health care bill has stolen so many headlines right now but once we get behind this, I wouldn’t be surprised to see a release out of Washington stating they’re going to try to move every (car) fleet into natural gas and make a transition out of diesel,” he said.
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CNBC Slideshows:
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Top Natural Gas Companies:
Allegheny Energy [AYE
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American Electric Power [AEP
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Nisource [NI
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Dominion Resources [D
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Duke Energy Corporation [DUK
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Disclosures:
No immediate information was available for Armstrong or Jarvis.
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Data is a real-time snapshot *Data is delayed at least 15 minutes
