Natural gas is an energy play that appears undervalued as oil and its related exchange traded funds (ETFs) have taken center stage.

But natural gas is still dirt cheap, and it climbed 6% during the past year. Oil surged 56%, casting a shadow over natural gas. The price hikes have led to a barrel of crude costing 12 times more than 1 million BTUs of gas, reports Sean Brodick for Money and Markets.

America gets around 40% of its energy from oil. Another 24% comes from natural gas, which is about the same as coal. The number of drilled natural gas well declined 1.1% in the last year, meaning that there’s not much of a safety net if inventories head south.

If the supply becomes strained, it can certainly work in favor of related ETFs:

  • First Trust ISE-Revere Natural Gas (FCG), down 0.05% year-to-date
  • iPath Dow Jones AIG Natual Gas TR sub-Index ETN (GAZ), up 11.5% year-to-date
  • United States Natural Gas (UNG), up 12.8% year-to-date

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.