Commodities: Natural Gas
There is about to be a major correction the the North American natural gas market, as the large number of natural gas producers in America and Canade won't be able to continue on, as there are too many of them in operation today.
What to watch for are those companies high operations costs and low margins, who aren't able to compete with lower prices, which will determine the winners and losers in the coming shakeout in the natural gas industry.
Not that natural gas prices have hit a seven-year low recently, selling at $2.50 per thousand cubic feet. The problem is no natural gas producer is blinking an cutting back on production, evidently thinking they're in it too big to make that decision.
Of course the market will make that decision for them, whether they want to or not, and a market-driven supply and demand response will be the result.
If you're an investor in natural gas, you must face the fall in prices (even though there has been some recent increase in prices in natural gas), and realize that the existing prices of natural gas companies can't continue on without a major correction. Demand is low and supply is high; that will eventually bring down the price of natural gas company stocks, and you don't want to be in them when they plunge.
Either the lack of extra storage of natural gas or a price drop will bring things back to reality. Either way, you need to change your way of thinking if you believe natural gas stocks can hold these prices in the midst of the current natural gas reality.
Commodities: Natural Gas
No comments:
Post a Comment