Monday, April 27, 2009

Natural Gas Update

For all the Marcellus Shale aficionados in the area we offer this natural gas update. Today the price of the NYMEX continuous gas contract touched $3.37 and I confess to being sorely tempted. But there is more to the supply question than meets the eye of those of us who see drill rigs in the neighborhood.

While the analysis of rig count and demand gives me some confidence of higher prices later this year, an analysis of LNG availability presented by The Barricade blog puts an additional spin that many in this region don't consider. I think it best to let the money flow of natural gas show us when to put on a trade.

Commodities move with the underlying economy. My oil price call last year was dictated by macroeconomic conditions on the horizon and I expect despite the bleak outlook in the Barricade analysis, macroeconomic revival will provide some greater light for Natural gas prices in the coming year, but no need to catch a falling knife.

John Barnyak