Natural Gas Prices Move Above $3
Natural Gas price moved up above $3 today. Due to a more bullish weather report and some pipeline explosion from Southern Star in Harvey County, Kansas.
Natural Gas is a volatile commodity as you can see from the chart above. I don't trade them. In fact I don't call myself a trader. I just buy and hold mostly. Buy and holding something so volatile requires more than faith but reasons and strategic long term reasons.
In the case of natural gas, I do find this sector a value play at this level from a rather long term perspective. I am quite bullish for long run for natural gas because it is the number one alternative to replace coal for power generation. It is a value play because major natural gas companies such as CHK, SWN and GPOR are all beaten up in such as sorrow stage. However, CHK just turn earning positive in recent quarters and has already rebounded more than 50%. The recent increase in oil price helped natural gas prices to stay afloat.
As you know coal is not environmental friendly but it is the main energy source for generating electricity power these days. Considering that the world is trending towards cleaner energy, the trend to use Natural Gas to replace coal will most definitely continue. The demand for natural gas will sustain.
On the other hand, Crude oil production has been under invested for so many years due to low oil price, that production capacity cannot be ramped up so easily as spare production capacity is a rare things these days.
For long term, emerging countries like China and India are all long term drivers for energy. Even the trade war between US and China will likely drive China to buy more crude oil or LNG.
Considering that Natural Gas is such a beaten up sector that it looks very attractive to me for a long term play. It is such a volatile play, however, that I am only hold a small percentage of my portfolio for this sector. Do your own research before you invest. It's probably not an easy ride for most investors!