Perfect Storm Craters Natural Gas

Best Value In The Market Today?

If it’s darkest before dawn, this is a black hole. 

It’s tough to imagine anything having a worse run than this asset. 

While everything is going up (and even total garbage stocks are flying), this has been in full collapse. 

It’s down 60% in the last two months alone.

It’s so out of favor I’m hesitant to even mention it. 

So, before I do mention it, I’ll remind you that every time this asset has fallen this low in the past 30 years, it has rebounded at least 100%. 

With that in mind…
 

The Ugliest Duckling

It’s natural gas. 

Natural gas has been in steady collapse the last few months. 

The chart below from MacroTrends is for the price of one million cubic feet of natural gas over the last five years. 
 

Full collapse in progress. 

Looking back, it seems inevitable now.

Natural gas had a heck of a run from the bottom in 2020 to the peak in early 2022.

That was when the Russia and Ukraine conflict sent investors flocking into all things natural gas. 

But, as usual, soaring prices led to a massive ramp up in production. 

The market didn’t care though.

One of Forbes’ magazine’s “Editor’s Picks” from September summed up what happened over the next few months after natural gas prices peaked: 

U.S. Natural Gas Production Sets A New Record, But Don’t Expect Relief On Your Heating Bills

This headline claims natural gas production is way up, but prices won’t drop. 

Sure, that’s possible.

But in the long run, it’s rarely probable.

Which brings us to today. 

Everything that can go wrong for U.S. natural gas has gone wrong. 

The final straw came this winter which is, on average, much warmer than history. 

As a result, natural gas consumption is way down, supplies are up and prices have fallen to historic levels.

Which, in the case of natural gas, is looking like a very good thing. 
 

What Goes Down, Must Come Up

That’s because natural gas prices rarely stay this low for long.

This 30 year chart of natural gas prices shows how low natural gas prices are today:
 

They’re not far from their all-time lows of which have been hit twice in the last decade. 

And both were followed by rebounds of more than 100%. 

Of course, we’ll admit, there’s no clear catalyst for a rebound. 

But that’s also a big part of why natural gas prices have fallen so much. 

It’s these times when capitulation comes, bottoms are put in, and rebounds start to build. 

If you’re worried about a stock market correction, economic deterioration, or other major risks, natural gas may provide you with a rare contrarian buying opportunity.