Worst-performing commodity of 2009
Today's Financial News - Posted November 30, 2009
While the commodities markets focus on gold, silver and even pork bellies, one domestic commodity is having a very tough year. It’s bad news for natural gas bulls.
By Andrew Snyder, TodaysFinancialNews.com
Baltimore – (TFN): If natural gas is the worst performing commodity of 2009, why have I been writing so much about its profit potential over the past two months?
Simple. It’s an options investor’s dream come true.
With the nation’s natural gas inventories now at historic capacity and recently eclipsing the 99% full mark, we have way too much of the stuff. The funny thing is, greedy drillers don’t know when to quit. Even with the markets screaming “no mas,” producers are stuffing more and more gas into the country’s pipelines.
The action is sending prices lower and lower and lower. Just today, natural gas’ value has plunged by nearly 6%.
That means options investors – at least the ones who followed my advice and bought put contracts– are sitting on big gains. Over at TFN Strategic Trader, members locked in gains of 400% just a couple of weeks ago.
If the action continues, four more sets of triple-digit gains could be on the way.
Headlines say it all
During a relaxing post-holiday weekend, I had plenty of time to sit down and pour through the nation’s headlines. It was confirmation after confirmation.
This morning, the Charleston Daily Mail wrote, “Vast supply alters gas industry.”
Saturday’s edition of Pennsylvania’s Beaver County Times featured “Marion Twp. rig could be the beginning of boom beneath us,” an article describing the region’s first Marcellus Shale rig.
Friday’s edition of the Patriot News (PA) had an op-ed piece, “Pennsylvania ‘Wilds’ benefit greatly from Marcellus Shale,” that discusses the estimated $2.3 billion economic impact of recent massive drilling efforts.
In Bloomberg today, the global news outlet sports a headline, “Natural gas glut overwhelms speculators, defies rally.”
And finally (I could go on but won’t), the Fort Worth BusinessPress writes, “Winter outlook not great for natural gas drillers.”
It’s fair to say, the headlines speak for themselves. If they are not speaking of the massive glut, they discuss the industry’s record-shattering expansion.
This is not hyperbolic commentary to get attention. These are the facts.
The nation has too much natural gas. Our inventories are weeks away from overflowing and drillers are still tapping new wells.
It’s a recipe for disaster, at least for the longs. For us shorts, it is an incredible profit opportunity.
Read my updated report right here.
Next Article: TFN eNews 11/30/2009: One stock to play this “Cyber Monday”
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December 1st, 2009 at 12:14 pm
The real question is, at what point does the above mentioned widely known facts become fully priced into natural gas?