About Me

Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!

Monday, February 10, 2014

Natural Gas & Oil Prices

The natural gas price experienced a calamitous decline over the 2008 - 2012 period, with gas
falling back to $2 per mcf  in early 2012, a price not seen since early 2002. Since then, the
market has improved on rising demand and the slow process of shutting in production at the
wellhead. Gas is just coming off a roughly seasonal uptrend with price likely carried $.60
per mcf higher by cold winter weather over the eastern two / thirds of the US. Looking out
12 months, I am projecting gas to stay primarily in a range of $3.80 - 4.80 with some
seasonal weakness expected over the Aug. - Sep. period. $NATGAS

I continue to see gas as a reasonable long term play, but I have traded it rarely because volatility
can occasionally be excessive and sudden. Since the volatility has smoothed out in recent years,
I may add it to my trading list. Indicators such as RSI have worked better over the past few years.

The significantly higher gas bill for heating this winter may have cut into consumer discretion-
ary spending.

The oil price has behaved in strongly contra - seasonal fashion so far this year as cold weather
has sparked demand for home heating oil here in the northeast. WTIC at $100 bl. is rich right
at the moment when intermediate term supply / demand is factored in. However, the price of
crude is not at all outlandish if the global economy progresses as currently expected in 2014.
(The oil price is shown in the third panel of the gas chart.)

The gasoline price has been seasonally weak so far this year as severe winter weather has cut into driving here in the US. It could become interesting as a long side trade over the next month or two
assuming the weather returns to a more nearly normal pattern. (Gasoline is shown in the bottom
panel of the chart.)

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