Posts Tagged ‘natural gas prices’

NATURAL GAS “Volatile by Nature, getting ahead” Final Part :)

3. Active hurricane forecasts may underpin prices

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The numbers are out. An active storm season is predicted for the Atlantic and natural gas-related ETFs are already gearing up and moving on the news. More storms than “normal” – about 16 – are anticipated to hit the Atlantic coast of  the United States this season. Of these, eight are expected to become hurricanes and about four of them are going to be intense, according to the Tropical Storm Risk.

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The forecast joins a growing number of predictions that the 2010 Atlantic hurricane season, which starts June 1, will be among the most active on record. As the number of hurricanes rises, so do the chances of one striking the oil-rich Gulf of Mexico or Florida’s crop areas.

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The Gulf is home to about 30% of U.S. oil and 12 % of U.S. natural gas production, the U.S. Energy Department says. It also has seven of the 10 busiest U.S. ports, according to the Army Corps of Engineers. Meanwhile, BP is still trying to cap a leaking offshore oil well that has created a devastating slick that is washing up in Louisiana. Attempts to stop the oil will be hampered if and when a tropical storm or hurricane passes through the Gulf of Mexico.

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4. Warm Weather

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It is expected that temperatures in the Northeast and Midwest, the key gas consuming regions, to average above normal in the coming days, with highs frequently climbing to the mid-80s Fahrenheit area. However, a healthy economic recovery also could trigger a strong gain in industrial demand this year, which accounts for nearly 30 percent of total gas consumption.

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Crude Oil & Natural Gas Ratio

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Historically, the price of oil and natural gas has moved in tandem because the demand for both commodities move up or down in conjunction with the economy and weather. The historical oil-to-gas price ratio has ranged from 6:1 to 13:1. For example, at a 10:1 ratio, if the price of natural gas is $7 per MMBtu, then the value or price per barrel of crude oil is expected to be around $70 per barrel. This oil-to-gas price ratio move up and down based on current and expected future events, particularly if there is political unrest.

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However, the oil-to-gas price ratio changed dramatically in the middle of 2009. As crude oil climbed to over $80 per barrel & natural gas NYMEX prices fell to $4 per MMBtu, taking the oil-to-gas price ratio to 20:1.Because of the wide price ratios last summer, some investment companies urged investors to buy natural gas commodities based solely on this ratio, under the belief that it would ultimately return to a historical level of 6:1 to 13:1, providing investors with a formidable profit. Now days we are witnessing that natural gas prices are getting underpinned and are expected to outperform crude oil so that the ratio will come again in its range.

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With keeping these fundamentals into consideration, investors can bet on this interesting commodity.

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NATURAL GAS “getting ahead with confidence” Part 1

Scarcity is always good news for a commodity-based investment. But when it comes to natural gas, scarcitydoesn’t seem to be an issue these days. Natural gas prices have been extraordinarily volatile over the past 15 years, and the recent experience is no exception as, prices have gained sharply since August 2009. However, they are still less than half what they were in 2008.

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With an unpredicted surge in production, the natural gas price is getting cheaper and cheaper compared to oil. There are concerns among traders also that the market will be oversupplied in the short- to medium-term, with rig counts going up and industrial demand still struggling due to the weak economy. These factors translate into limited upside for natural gas-weighted companies and related support plays. But, the gap between supply and demand is expected to reverse in the coming months as natural gas producers bet on the improving U.S economy, the forecast of an active hurricane season and many other factors.

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However, natural gas might have more upside potential than downward potential for the following reasons:

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1. Rising Inventory Discourages Production

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Lower demand and higher production resulted in storage injections. U.S. Energy Information Administration data on 10th June, 2010 showed that domestic gas inventories rose by 99 billion cubic feet to 2.456 trillion cubic feet, a record high for this time of year and a level not normally reached until early July. Strong gains in storage have helped ease concerns about rebuilding stocks for next winter even if the summer turns out hot or Gulf Coast storms temporarily disrupt supplies. However, sustained low prices could reduce drilling activity over time. While the gas drilling rig count has fallen in five of the last seven weeks and raised expectations that U.S. production will slow later this year and tighten an oversupplied market, some traders worry that prices between $4.50 and $5 were still high enough to encourage more drilling. Gas prices might rise along with demand once production starts to decline.

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2. Increasing Usage for N.G

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Natural gas is an almost perfect energy source. Lower-priced natural gas will once again compete with coal for the electricity supply. Growing concerns about the environment also make it more attractive than coal. In addition, natural gas fired plants are much cheaper to build than nuclear plants. Gas now competes with diesel fuel for trucks and vans. In Asian countries, gas is being used by a growing number of regular cars. These benefits of natural gas over coal can also underpinned the prices in coming period.

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Bull Run in Commodities May Continue

Hello Friends here we come up with the Latest Agri Commodities updates from various parts of the globe.

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Bull run in commodities may continue


Bull run in commodities may continue:

Spurt in prices to be driven by dollar weakness, rise in demand and low supplies.

The global bull run in commodities is likely to continue through next year due to dollar weakness, supply restraint and, eventually, a pickup in demand.

Crude oil prices are also up 74 per cent, but the energy complex as a whole is down, as natural gas prices are weighed down by massive oversupply.

Precious metals have also risen 37 per cent.

The base metals complex has performed well this year, driven by the rebound in growth in China, although some of the increased demand has gone into inventory.

Sugar and soybeans have been the exception in 2009, rising sharply while the rest of the agricultural complex underperformed.

This was largely on supply issues; improved crops in 2009-10 are expected to flood the market, dampening prices.

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In Other major Commodities Updates we can read about Govt estimation about the Edible oil output which says that Edible oil output may dip 7.4% in 2009-10.

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Edible oil output may dip 7.4% in 2009-10:

The government today said edible oil output is likely to decline 7.4 per cent to 7.96 million tonnes in the 2009-10.

Edible oil production, last year, stood at 8.6 million tonnes.

Oil season runs from November to October.

Production/net availability of edible oil from all domestic sources is estimated to be 7.96 million tonnes in the 2009-10,” Minister of State for Agriculture K V Thomas said.

The demand of edible oil in the country is estimated to have increased to 17.79 million tones this year, he said.

The domestic edible oil production is likely to decline following a dip in oilseeds production, which is estimated to be 15.23 million tonnes in the kharif season against 17.88 million tonnes in the last season, the official data showed.

Thomas said, “There is a wide gap in the production and demand of edible oil in the country and imports are resorted to bridge the gap.”

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