Gas pain: The International Energy Agency weighs in
Today's Financial News - Posted November 5, 2009
I am not the only one yelling about the natural gas industry’s impending doom. This week, I’ve got the backing of a major international agency.
By Andrew Snyder, TodaysFinancialNews.com
Baltimore – (TFN): This may be your last chance. As each day passes the pressure on the natural gas market grows larger and larger. Today, there are two major catalysts ready to send the industry into a nosedive.
The first comes from the Energy Information Administration, which tells us the nation’s natural gas inventory has built by another 29 billion cubic feet over the past week. That means the gap between gas in storage and total capacity continues to shrink.
According to today’s figures, there is 3.788 trillion cubic feet in storage, 11.1% higher than this time last year. That figure doesn’t sound like much until you look at the nation’s total storage capacity, which stands at 3.889 trillion cubic feet.
If we continue to add to our coffers at the current rate, we’ll be out of space in less than a month. When it happens, the spot market will be flooded with gas and prices will plummet.
Go short now!
Don’t expect it to be a short-term phenomenon, especially if you agree with the predictions out of the International Energy Agency (IEA).
Next Tuesday, the group will unveil its World Energy Outlook. According to early drafts, the agency is considerably bearish on the future of natural gas, saying we’ve turned the corner from a sellers market to a buyers market.
Just like I am, the IEA is concerned with the massive amount of “new” natural gas that is about to flood the market as a result of recent shale discoveries and increased industry efficiencies.
One of the key predictions in the report is the massive oversupply (up to 250 billion cubic meters) of natural gas the industry will be forced to endure over the next five years.
Not only does that mean prices are going lower, but LNG terminals will be shuttered and all those new wells sprouting up in places like Pennsylvania, Ohio, West Virginia and New York will be plugged as well.
If you have been following my commentary over the last month or so, you know the IEA’s findings are nothing new. I did my own research and let TFN Strategic Traders in on three plays to make almost two weeks ago.
Our timing could not have been better.
So far, the three trades are worth gains of 33%, 88% and 242%. Not bad for just nine trading days.
But the best days (at least for shorts) are yet to come. As natural gas prices plummet and the industry self-destructs, these plays will soar in value.
It is not too late to get in on the action. To read my full, in-depth report click here.
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