Huge liquidity and an easy monetary policy have resulted in more investors looking at commodities as an asset class. “With that, the crude market, as the bellwether of the energy complex has led everything higher, natural gas included,” says Eric Wittenauer, analyst at Wachovia Securities. “Prices will remain underpinned because natural gas remains undervalued per Btu compared with crude oil. And domestic prices are considerably lower than international prices,” which dictate liquid natural gas prices, he says. In July, he says support is at $10.95.
Not only that, but inventories have gone from a 13% surplus to a 15% deficit over last year, observes Fain Shaffer, president of Infinity Trading Corp. And the Commitment of Traders report shows commercial natural gas traders are net long approximately 23,000 contracts. Further, non-commercials are net short 65,000 contracts, so he infers that there is still a lot of short covering to go, particularly as the commercial category does not pull out the index funds, which add a large amount of long positions.
“The next objective is $14, especially with all the other energies at their highest ever,” Shaffer says. In July, support is $12 and ultimately he expects $16 by the end of cooling season. “And that’s without a hurricane,” he says.
