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IBDvalueinvestin (99.66)

Buy all natural gas below $5 and sell it at $5+ in late 2009 and 2010.

Recs

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August 20, 2009 – Comments (3)

Natural Gas is at $2.93 tonight , so if you buy now its pretty much a double. Here is why its going to go up:

Chevron Corp., the second-biggest U.S. oil company, said last week that it will idle all onshore gas drilling by the end of this year. The San Ramon, California-based company, which ranks eighth in U.S. gas production, said it will shift more rigs to oil projects.

Gas Drilling Slows

Even as they keep their producing wells pumping gas, XTO, Chesapeake and other U.S. companies have cut exploration budgets. While that won’t slow current output, it will mean fewer wells coming on line in the years ahead. That trend will lead to lower output, which should bring supplies in line with slumping demand by sometime next year, Devon Chief Executive Officer Larry Nichols said yesterday in a telephone interview.

The number of gas rigs active in the U.S. fell to a seven- year low last month, according to a count by Baker Hughes Inc.

Devon will shut some gas wells in Wyoming’s Powder River Basin this year because they lose money at current prices, Nichols told investors yesterday on a conference call. Other wells will be idled because “we’d rather keep the gas in the ground and sell it next year at a higher price,” he said.

That may not be enough to spur a price recovery. Byrne, the BMO analyst, said he sees gas averaging $5 per million British thermal units next year. Gas futures averaged more than $10 in last year’s first half.

 

3 Comments – Post Your Own

#1) On August 20, 2009 at 11:58 PM, kaskoosek (65.67) wrote:

Feb 2010   5.386


























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#2) On August 21, 2009 at 12:00 AM, kaskoosek (65.67) wrote:

http://www.nymex.com/ng_fut_csf.aspx?product=NG

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#3) On August 21, 2009 at 11:07 AM, CoastalTrader (90.77) wrote:

That sounds good IBD but how do you do it if you don't physically store the gas?  UNG will kill you if you are not extremely careful (contango is a monster).

I am looking to abandon UNG on or about Aug. 28.  After that, I think gas stocks like XTO, SJT and perhaps the ETF FCG are the way in.

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