If your a logical thinker, as I like to believe I am. You'd be questioning the current prices of natural gas. Now I dont believe that the price should be any higher given the current surplus we have, Supply and Demand should always rule the market. However, I do think that in the near future the surplus will begin to dwindle, and there may be a lag between having to much natural gas and having to little, thats how things usually work, from one extreme to the other. Right now the Companies involved with the exploration and production have slowed their pace to a fraction of what it was a year ago, in an effort to cut as many costs as possible. Its only a natural reaction to a sharp price drop; I think that any business owner would try to get as lean as possible, maybe shut down some projects that are currently unneccessary, postpone some explorations that were in the mix, etc.
So as the winter months roll around and the world begins to flip on the heat I would guess that the current surplus would begin to diminish, and as the forcast is for a 2010 economic recovery, the demand for gas (and oil) will increase. So when the demand increases and the surplus fades its going to take time for these companies to get back into their normal production modes, thus producing a lag between supply and demand. There are a few ways to play this rebound in Natural Gas prices, and I believe that one of the most profitable buys right now is the United States Natual Gas Fund (UNG:NYSE). The price on this Fund has been beaten down so severly that just a rebound to normative price levels would mean nearly a 200% gain. Another great buy is Chesapeake Energy (CHK:NYSE), here you would be looking at a 100% gain if prices rebound back to their early 2008 levels. Can we expect a full recovery? no one knows for sure, but right now there is a serious offset if supply and demand which is affectin the price, and once these imbalances begin to correct we will see some sort of price gain.
Good Luck and Safe Investing
